# RE: st: xtabond and OLS for separate years

 From "Antonio Rodrigues Andres" To Subject RE: st: xtabond and OLS for separate years Date Wed, 05 May 2004 02:11:58 +0200

```xtivreg using as instruments the same regressors gives the same result
that doing it by hand

Yes, you get the same results.

*FIRST DIFFERENCES
. xtivreg lsrt (\$xvars=income unempl), fd

First-differenced IV regression                 Number of obs      =
276
Group variable: country                         Number of groups   =
21

R-sq:  within  = 0.0096                         Obs per group: min =
3
between = 0.8987                                        avg =
16.9
overall = 0.3945                                        max =
37

chi2(2)            =
4.12
corr(u_i, Xb)  = -0.5904                        Prob > chi2        =
0.1277

------------------------------------------------------------------------------
d.lsrt       |      Coef.   Std. Err.      z    P>|z|     [95% Conf.
Interval]
-------------+----------------------------------------------------------------
income       |
D1 |  -.0176139   .0088856    -1.98   0.047    -.0350292
-.0001985
unempl       |
D1 |  -.0041495   .0044982    -0.92   0.356    -.0129659
.0046669
_cons        |    .005815    .005735     1.01   0.311    -.0054254
.0170553
-------------+----------------------------------------------------------------
sigma_u |  .42097985
sigma_e |  .05951118
rho |  .98040789   (fraction of variance due to u_i)
------------------------------------------------------------------------------
Instrumented:   income unempl
Instruments:     income unempl

. regress dlsrt dincome dunempl

Source |       SS       df       MS              Number of obs =
276
-------------+------------------------------           F(  2,   273) =
2.06
Model |  .014576629     2  .007288314           Prob > F      =
0.1297
Residual |  .966851358   273   .00354158           R-squared     =
0.0149
0.0076
Total |  .981427987   275  .003568829           Root MSE      =
.05951

------------------------------------------------------------------------------
dlsrt |      Coef.   Std. Err.      t    P>|t|     [95% Conf.
Interval]
-------------+----------------------------------------------------------------
dincome |  -.0176139   .0088856    -1.98   0.048    -.0351068
-.0001209
dunempl |  -.0041495   .0044982    -0.92   0.357    -.0130051
.0047061
_cons |    .005815    .005735     1.01   0.312    -.0054755
.0171054
------------------------------------------------------------------------------

>>> M.E.Schaffer@hw.ac.uk 05/05/04 12:27 AM >>>
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
>
> > 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
> http://www.som.hw.ac.uk/cert
> *
> *   For searches and help try:
> *   http://www.stata.com/support/faqs/res/findit.html
> *   http://www.stata.com/support/statalist/faq
> *   http://www.ats.ucla.edu/stat/stata/
>
> *
> *   For searches and help try:
> *   http://www.stata.com/support/faqs/res/findit.html
> *   http://www.stata.com/support/statalist/faq
> *   http://www.ats.ucla.edu/stat/stata/
>
> *
> *   For searches and help try:
> *   http://www.stata.com/support/faqs/res/findit.html
> *   http://www.stata.com/support/statalist/faq
> *   http://www.ats.ucla.edu/stat/stata/
>

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
________________________________________________________________

DISCLAIMER:

This e-mail and any files transmitted with it are confidential
and intended solely for the use of the individual or entity to
whom it is addressed.  If you are not the intended recipient
you are prohibited from using any of the information contained
in this e-mail.  In such a case, please destroy all copies in
Watt University does not accept liability or responsibility
for changes made to this e-mail after it was sent, or for
viruses transmitted through this e-mail.  Opinions, comments,
conclusions and other information in this e-mail that do not
relate to the official business of Heriot Watt University are
not endorsed by it.
________________________________________________________________
*
*   For searches and help try:
*   http://www.stata.com/support/faqs/res/findit.html
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/

*
*   For searches and help try:
*   http://www.stata.com/support/faqs/res/findit.html
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/
```