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Re: st: cluster option of ivreg2


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Giovanni Pica <pica@socsci.soton.ac.uk>
Subject   Re: st: cluster option of ivreg2
Date   Fri, 06 May 2005 10:32:09 +0100 (BST)

Giovanni,

Quoting Giovanni Pica <pica@socsci.soton.ac.uk>:

> Dear Stata Users,
> 
> I have a problem with the cluster option of ivreg2.
> 
> I am running the following regression:
> 
> ivreg2 logw X P (T T*P = Z That*P), cluster(personid)
> 
> this is using IV in a difference in difference regression where T is the
> treatment group, P is post-reform dummy and T*P is the interaction
> term of interest.
> The use of That*P as an instrument, where That is obtained from a fist
> stage regression of T on the exogenous regressors (X and P) and the
> instruments Z, has been already suggested in Stata list in another context 
> (Mark Schaffer in reply to Steve Morris):
> http://www.stata.com/statalist/archive/2003-11/msg00795.html
> 
> The cluster(personid) is required because it's a panel of individual
> wages.
>  
> All this works when I use the ivreg command, when I use the ivreg2
> command it says "matrix not symmetric".

Have you updated your ivreg2 so that it's the latest available?

There was a bug in earlier versions that resulted from Stata's matrix
mulitiplication.  The matrix inversion command requires a symmetric matrix,
and very occasionally (I think because of numerical issues) ivreg2 would
multiply a series of matrices and end up with a matrix that should have been
symmetric but wasn't.  I am pretty sure we fixed all the instances of where
this could arise in ivreg2, but maybe we missed one.

--Mark

> Is there something wrong with the use of IV in the diff-in-diff
> framework or the difference between ivreg and ivreg2 is due to the the way 
> the commands handles the cluster option?
> 
> Best,
> Giovanni
> 
> 
> 
> 
> *
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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 +44-131-451-3294
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes

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