Hey everyone!
I'm trying to estimate an unrestricted system of two equations where both endogenous variables are left-censored (therefore a multivariate Tobit with endogenous covariates) using gsem. It seems pretty straightforward but I get the following error:
invalid path specification;
a nonrecursive system among the variables 'y1' and 'y2' is not allowed
I have consulted the theoretical literature (specially Amemiya (1974), which seems to be the seminal paper) and haven't found a reason why such a model can't be estimated. Let me show you what I'm talking about by a simple simulation, try running the following code:
clear
set obs 200
gen x=runiform()
gen u1=rnormal(0,1)
gen u2=rnormal(0,1)
gen y1=x+u1+u2
gen y2=x+0.5*u1+1.5*u2
replace y1=0 if y1<0
replace y2=0 if y2<0
gsem (y1 <- y2 x, family(gaussian,lcensored(0))) (y2 <- y1 x, family(gaussian,lcensored(0)))
All comments and suggestions will be appreciated.
Regards
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