Re: [Gretl-users] Help on simultaneous equation model

Monday, 7 March 2011

On Sun, 6 Mar 2011, Lemma Tenessa wrote:

...
 I am trying to run a simultaneous equation model which is modeled
as;

 P*=D*+1X1+1
 D*= zP*+ 2X2+2

 Where each of the above two equations are ordered probit
 equations and P* and D* defined as, poverty and natural
 resources degradation are ordered latent endogenous variables
 which will have ordinal values between 1-4. [...]

 Of course I am trying to fit the model in this way;
 Given the original simultaneous equation,

 P*=D*+1X1+1
 D*= P*+ 2X2+2

 I will first regress each equation via ordered probit by GERTL
 software and have predicted probabilities for P* and D* i.e P^
 and D^ 
Is your plan to use X2 as an instrument in the first-stage
equation for P*, and X1 as an instrument for D*? If not, then
you'll have to find at least one additional instrument for each of
P* and D*, just as in two-stage least squares.

...
 Next stage I will undertake ordered probit regression by
 replacing D* and P* in the right side by P^ and D^ that is

 P*=bD^+a1X1+e1
 D*= cP^+ a2X2+e2

 Finally interpret the output brought by the last regression(2nd
 stage)

 Now I want to be confident on two things
 1) if the above way I propose is the right one 
Given two or more suitable instruments, this sounds OK. But I'm
not sure offhand how to get a consistent estimate of the
covariance matrix for the second-stage ordered probit. Hopefully,
someone who knows more about this than I may step in.

...
 2) If the the GERTL simultaneous equation technique can solve
 this 
No, the "system" command for simultaneous equations expects a set
of linear equations.

Allin Cottrell

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Re: [Gretl-users] Help on simultaneo​us equation model

Re: [Gretl-users] Help on simultaneous equation model