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RE: st: xtabond and OLS for separate years


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Kate Ivanova <kivanova@usc.edu>
Subject   RE: st: xtabond and OLS for separate years
Date   Tue, 04 May 2004 23:27:07 +0100 (BST)

Kate,

Quoting Kate Ivanova <kivanova@usc.edu>:

> Hi Mark,
> 
> I tried to run xtreg, fd (first-differencing without instrumenting)
> as you
> suggested but I could not find this option in the xtreg command.
> There is
> xtivreg, fd but then this is for estimation with instrumental
> variables. Is
> there any other way to estimate a first-differenced model without
> instrumenting?

Funny, I thought it would be there.

I suppose you either have to try to trick xtivreg into running an 
uninstrumented equation by specifying the same instruments as regressors - 
and it might be too clever to be fooled - or you have to first difference 
by hand.

--Mark

> Thanks!
> 
> Kate
> 
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Kate
> Ivanova
> Sent: Monday, May 03, 2004 10:02 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: RE: st: xtabond and OLS for separate years
> 
> Mark,
> 
> Thank you very much for your suggestions. They are very helpful.
> Yes, I did
> mean OLS in cross-section so I'll now compare it to the estimators
> you
> specified below. I'll get back again when I have the results. Thanks
> a lot! 
> 
> Kate
> 
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Mark
> Schaffer
> Sent: Monday, May 03, 2004 4:09 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: xtabond and OLS for separate years
> 
> Kate,
> 
> Date sent:      	Sat, 01 May 2004 17:59:00 -0700
> From:           	Kate Ivanova <kivanova@usc.edu>
> Subject:        	st: xtabond and OLS for separate years
> To:             	statalist@hsphsun2.harvard.edu
> Send reply to:  	statalist@hsphsun2.harvard.edu
> 
> > Hi,
> > 
> > I am confused by the results I get using xtabond. I have a panel
> of 116
> > countries over 10 years and when I run separate regressions for
> each year
> > using OLS, my variables (income and income squared) are highly
> significant
> > (at a 0.001 level). But when I run xtabond with one lag of the
> dependent
> > variable, they are not significant at all. I wonder why I have
> such a
> > difference between the results. Any help, any ideas would be
> greatly
> > appreciated.
> 
> It's hard to tell exactly what's going on from the info you've 
> provided, but there are at least two possibilities:
> 
> 1. You are comparing OLS in cross-section (yes?) and xtabond, which
> 
> you can think of as a first-difference estimator with instrumenting.
>  
> Each of your cross-sections uses the cross-sectional variation
> across 
> 116 countries in any year; xtabond using only the time-series 
> variation within countries.
> 
> A better comparison would be to leave the instrumenting out of it
> for 
> the moment, and compare:
> 
> OLS period-by-period (uses only cross-sectional variation)
> Between estimator (also uses only cross-sectional variation)
> Fixed effects (uses only "within", i.e., time-series, variation)
> First differences (also uses only "within" variation)
> Random effects (uses both "within" and "between" variation)
> 
> 2.  xtabond is an IV estimator, and the results you get will depend
> 
> on the instrumenting.  You can compare the xtabond results with the
> 
> results from first-differencing without instrumenting (xtreg, fd),
> 
> for example, and see what happens.
> 
> Hope this helps.
> 
> --Mark
> 
> > 
> > Kate
> > 
> > 
> 
> 
> Prof. Mark E. Schaffer
> Director
> Centre for Economic Reform and Transformation
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS  UK
> 44-131-451-3494 direct
> 44-131-451-3008 fax
> 44-131-451-3485 CERT administrator
> http://www.som.hw.ac.uk/cert
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes
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