*
*  Example 18.3
*  J. Wooldridge, Econometrics of Cross Section and Panel Data
*
*  Note: The sample data files include all required data transformations.
*        However, in many cases we show how these data transformations would
*        be created in RATS from the basic data, as this is something you will
*        need to know how to do in practice.
*
open data fertil2.raw
data(format=free,org=columns) 1 4361 mnthborn yearborn age electric radio tv bicycle educ $
  ceb agefbrth children knowmeth usemeth monthfm yearfm agefm $
  idlnchld heduc agesq urban urb_educ spirit protest catholic $
  frsthalf educ0 evermarr educ7
*
set educ7 = educ>=7
set agesq = age**2
*
* Estimate OLS regression.
*
linreg children
# constant educ7 age agesq evermarr urban electric tv
*
* Now 2SLS with frsthalf as an instrument for educ7.
*
instruments constant frsthalf age agesq evermarr urban electric tv
linreg(instruments) children
# constant educ7 age agesq evermarr urban electric tv
*
* Use first stage probit probabilities as an instrument instead.
*
ddv(dist=probit) educ7
# constant frsthalf age agesq evermarr urban electric tv
prj(dist=probit,cdf=propensity)
instruments constant propensity age agesq evermarr urban electric tv
linreg(instruments) children
# constant educ7 age agesq evermarr urban electric tv
*
* Same thing with robust errors
*
linreg(instruments,robusterrors) children
# constant educ7 age agesq evermarr urban electric tv