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Re: RE: st: suest with large number of fixed effects


From   jpitblado@stata.com (Jeff Pitblado, StataCorp LP)
To   statalist@hsphsun2.harvard.edu
Subject   Re: RE: st: suest with large number of fixed effects
Date   Thu, 13 Sep 2007 10:38:31 -0500

Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> quoted a post I made regarding -areg-
after -suest-:

> I had forgotten about Jeff's post.  Here is the key extract:
> 
> "We've recently discovered that -suest- yields incorrect results when
> used
> after -areg-.  This is not something that can easily be fixed given that
> the
> meat of the sandwich estimator of variance (Robust/Huber/White VCE)
> cannot be properly computed due to the fact that the coefficient
> estimates for the
> absorbed categories in -areg- are not present in -e(b)- (and the
> corresponding indicators are not present in the dataset)."
> 
> and here's a link to the full post:
> 
> http://www.stata.com/statalist/archive/2006-06/msg00874.html
> 
> What puzzles me about Jeff's statement is that absorbing
> (partialling-out, demeaning, removing through first-differencing) the
> fixed effects is no obstacle to using the
> sandwich/robust/Huber/White/and-don't-forget-Eicker VCE with other
> estimators.
> 
> For example, demeaning and using -regress- with -cluster- generates
> exactly the same results as -xtreg,fe cluster()- and indeed -areg-, as
> this example shows (again using Ben Jann's -center- command):
> 
> sort id
> by id: center ys k n, casewise
> reg c_ys c_k c_n, cluster(id)
> xtreg ys k n, i(id) cluster(id) fe
> areg ys k n, absorb(id) cluster(id)
> 
> If it's legitimate to use the robust VCE with transformed individual
> equations, shouldn't it also be legitimate to use -suest- to combine the
> equations?  The "within-equation" parts of the VCE reported by -suest-
> will be the same (though maybe with a different and asymptotically
> uninteresting dof adjustment) as that obtained by estimating the
> separate equations on their own.  -suest- is just adding the
> "cross-equation" part of the VCE.
> 
> I'd be very interested in hearing more about this from Jeff or anyone
> else.

Mark is correct regarding the above 'statistical' statements.

-xtreg, fe- and -areg- have the necessary ingredients, namely the demeaned
dependent and independent variables, on hand at the moment they compute the
clustered-robust VCE.

Unfortunately -suest- does not have these ingredients, it only has the dataset
currently in memory and the information stored in -e()-.

The point of my original post was to say that making -suest- work properly
after -areg- was going to require adding some special code to -suest- that
will only be useful for results from -areg-.

For the time being we decided to prevent -suest- from working with -areg-s
results; we can always revisit this issue in the future.

--Jeff
jpitblado@stata.com
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