Hi to all,
I am using simultaneous equations for my study and I have to solve the possible endogeneity problem.
In our study, we are trying to analyze factors that influence farmers' decisions to purchase seeds from different sources. We suspect the existence of endogeneity between seed source and seed variety purchase. And we don't have suitable instruments to solve this problem.
Hence, I am looking for an econometric tool to solve this problem when the dependent variable is binary (seed source) and continuous endogenous variable (varietal age) and suitable IV's are not availability.
STATA code, ivreg2h is not suitable to my condition seems as my dependent variable is binary
Hoping someone could help me to solve this issue.
Thanks
Use 2SLS anyway: the estimated coefficient would be consistent. The problem is that if you do not find an IV the parameter is not identified. Theoretically, you could still estiamte the model using maximum likelihood (the functional form would make that there is no perfect collinearity), but, in practise, it is rarely accepted.
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