/*The model is D=I(v+x'B+e>0), E(ez)=0, v=s'A+eta, 
  eta density unknown,independent of e,s,x. 
  s is union of regressors x and instruments z */ 

*.simpbin2 dv, bin() exog() very()
* set trace on

cap pro drop simpbin2
pro def simpbin2
version 8.0

local varlist "required existing min(2) max(2)"
local if "optional "
local options BIN(string) EXOG(string) VERY(string)"
parse "`*'"
                           
preserve

tokenize "`varlist'"                                   
di in g "Regression of `2' on `very'"
qui reg `2' `very'

tempvar eta 
predict `eta' if e(sample), resid

qui sortedf1 `eta'                     /*generate sorted data density of V model error*/
local f `eta'
zrnd `f'                               /* round near zero density away from zero*/
                                                                 
gen `1'star=(`1'-(`2'>=0))/`f'

di in g "                "
di in g "Based on sorted data density of `1', f(`2'|.)"
di in g "                "
di in g "`1'star is constructed as (`1'-(`2'>=0))/ f(`2'|.)"
ivreg `1'star (`bin'=`exog'),robust
drop `1'star


di in g "Note the Std. Err. and Conf. Interval are wrong! "
di "                                          "
di in g "Bootstrap command can be used to get correct Std Err. and Conf. Interval."
di "                                          "
di in y `"Try it, :)) -  bs "simpbin2 varlist" _b , size() level(), reps() saving() replace"'
end