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st: xtivreg2 and clustering

From   "Alejandro Molnar" <>
Subject   st: xtivreg2 and clustering
Date   Thu, 1 Feb 2007 09:22:42 -0300 (ART)


I'm attempting to cluster standard errors at the level of panel units
while including unit-time interactions among the regressors (using
xtivrge2), and have run into the "number of clusters must be greater than
instruments" problem. Using the -fwl- option has been suggested in the
past (i. ;

Both in my application and the example provided in the command's help, I
get the result that the standard errors (for the coefficients I don't
"partial out" through fwl) are the same whether I use the fwl option or

I was expecting them to be different. I'm now thinking I should have
expected them to be the same: since the fwl option estimates the same
model (no new assumptions about errors, just a different order to the
mechanics), why should the standard errors be different?

So my question is: Is what I've said above wrong and estimates should be
different, or is the fwl option intended as housekeeping, to make sure I
don't go interpreting standard errors I don't understand?

Also, could someone please point me to articles about clustering in this
case (e.g. showing why the VC isn't of full rank), since I'd like to gain
some intuition about the problem.

Thanks in advance,

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