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RE: st: When number of regressors greaterthan the number of clusters in OLS regression


From   Divya Balasubramaniam <divya@uga.edu>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: When number of regressors greaterthan the number of clusters in OLS regression
Date   Mon, 1 Sep 2008 18:38:01 -0400 (EDT)

I do suspect within state variation since water is under the control of the State in India, this is one of the reason to suspect within state variation. 

Thanks a lot for your valuable suggestions.

Divya.

---- Original message ----
>Date: Mon, 1 Sep 2008 23:00:12 +0100
>From: "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>  
>Subject: RE: st: When number of regressors greater than the number of clusters in OLS regression  
>To: <statalist@hsphsun2.harvard.edu>
>
>Divya,
>
>> -----Original Message-----
>> From: owner-statalist@hsphsun2.harvard.edu 
>> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
>> Divya Balasubramaniam
>> Sent: 01 September 2008 22:26
>> To: statalist@hsphsun2.harvard.edu
>> Subject: Re: st: When number of regressors greater than the 
>> number of clusters in OLS regression
>> 
>> I am still quite unclear exactly why I do not need to cluster 
>> by State at all? Can you kindly explain it one more time to 
>> me?
>
>Whether or not you need to use cluster-robust depends on whether you
>think your data have a problem that cluster-robust can address, namely
>(1) the error terms in your equation are correlated within states
>because of unobserved heterogeneity (so the iid assumption fails), but
>(2) the error terms are not correlated across states.
>
>A good example would be whether you are looking at something that is
>affected by state-level regulation, i.e., the laws regulating it vary
>from state to state, but you don't have variables that control for this
>somehow.
>
>> Is it because that my dataset is not a sample but 
>> accounts for 100% of the population? Or is there something 
>> else I need to consider?
>> 
>> so instead of areg Y on X, absorb(state) robust 
>> cluster(state); I will now run areg Y on X, absorb(state) 
>> robust correct?
>
>Two comments here: first, you are probably better off using xtreg
>instead of areg (more modern Stata command); and second and more
>important, Stock and Watson (Econometrica 2007, if I recall correctly)
>have shown that the fixed effects estimator with -robust- generates SEs
>that are not correct.
>
>> Also can someone explain the inference of individual 
>> coefficients estimates when we encounter this kind of problem 
>> in case OLS regression (with lesser # cluster than the # regressors)
>
>See my previous email and the references therein - I think they're
>pretty clear, especially the one by Vince Wiggins.
>
>Cheers,
>Mark
>
>Prof. Mark Schaffer
>Director, CERT
>Department of Economics
>School of Management & Languages
>Heriot-Watt University
>Edinburgh EH14 4AS
>tel +44-131-451-3494 / fax +44-131-451-3296
>http://ideas.repec.org/e/psc51.html
>
>
>> Thanks,
>> Divya. 
>> 
>> ---- Original message ----
>> >Date: Mon, 1 Sep 2008 16:59:59 -0400
>> >From: Steven Samuels <sjhsamuels@earthlink.net>
>> >Subject: Re: st: When number of regressors greater than the 
>> number of 
>> >clusters in OLS regression
>> >To: statalist@hsphsun2.harvard.edu
>> >
>> >Divya-
>> >
>> >So, you have n = 436. Just remove State as a cluster variable and 
>> >continue with your modeling. You won't be troubled by the limit on 
>> >regressors again; just keep the number to <=44 (10% of observations).
>> >
>> >Good luck!
>> >
>> >-Steven Samuels
>> >
>> >On Sep 1, 2008, at 4:22 PM, Divya Balasubramaniam wrote:
>> >
>> >> Hello Dr. Steven,
>> >>
>> >> My dependent variable is:share of total number of households in a 
>> >> district having access to tap water. (I have the district totals)
>> >>
>> >> Divya.
>> >> =======================================
>> >> Divya Balasubramaniam
>> >> Economics PhD Student
>> >> Terry College of Business
>> >> University of Georgia
>> >> Athens -30602.
>> >>
>> >> From: Steven Samuels <sjhsamuels@earthlink.net>
>> >> Date: September 1, 2008 4:13:40 PM EDT
>> >> To: statalist@hsphsun2.harvard.edu
>> >> Subject: Re: st: When number of regressors greater than 
>> the number of 
>> >> clusters in OLS regression
>> >> Reply-To: statalist@hsphsun2.harvard.edu
>> >>
>> >>
>> >> Divya,
>> >> I reread your question and realize that you probably do not have 
>> >> sample data at all. The Census of India was not a sample 
>> at all, but, 
>> >> ideally, was a 100% enumeration. (Just as in other countries, this 
>> >> will not be perfectly true.) So, I am not sure that you should be 
>> >> clustering on State, or even on district, for that matter.
>> >> Please reply with details about your observations. For example, do 
>> >> you have information on individual households or just 
>> district totals?
>> >>
>> >> Regards,
>> >>
>> >> Steven
>> >>
>> >>
>> >> On Sep 1, 2008, at 1:05 PM, Steven Samuels wrote:
>> >>
>> >>> More basic questions, Divya:  What is your target population:  the
>> >>> 17 states (of India, perhaps?) or the entire country?  
>> Were the 17 
>> >>> states selected from all states by a sampling process?  
>> Or were they 
>> >>> chosen in some other way--for example, because they had data 
>> >>> available.  Are all districts from the selected states in your 
>> >>> sample?
>> >>>
>> >>>
>> >>> -Steven
>> >>> On Sep 1, 2008, at 12:35 PM, Divya Balasubramaniam wrote:
>> >>>
>> >>>> Dear Dr.Schaffer,
>> >>>>
>> >>>> I am using clustering in my analysis and I am having 
>> some trouble 
>> >>>> understanding some of the important issues. I have read several 
>> >>>> papers you have written on clustering issues and hence I am 
>> >>>> emailing you to seek help.
>> >>>>
>> >>>> I am doing a district level analysis for the census year 2001. I 
>> >>>> have 436 districts in total coming from 17 States. I run an OLS 
>> >>>> regression of Share of households having tap water access on 
>> >>>> several controls variables (I have about 25 Regressors). 
>>  I use the 
>> >>>> STATA command areg Y on X, absorb(State) cluster(state). 
>> I have the 
>> >>>> state fixed effects and clustered by State.
>> >>>>
>> >>>> My question is: I have more regresors(25) than the number of 
>> >>>> clusters(17). I also find in the STATA output that I have F-stat 
>> >>>> missing. I would like to seek your advice on whether I can make 
>> >>>> inference by looking at the individual coefficient estimates and 
>> >>>> the reported robust Standard errors. I did see your 
>> comment on this 
>> >>>> issue on the STATA listserv. However, I could not find 
>> answers as 
>> >>>> to how to fix this problem of having more regressors than the 
>> >>>> number of clusters.
>> >>>>
>> >>>> I will be extremely thankful if you can kindly help me in this 
>> >>>> regard.
>> >>>> Sincerely,
>> >>>> Divya.
>> >>>> =======================================
>> >>>> Divya Balasubramaniam
>> >>>> Economics PhD Student
>> >>>> Terry College of Business
>> >>>> University of Georgia
>> >>>> Athens -30602.
>> >>>> *
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>> =======================================
>> Divya Balasubramaniam
>> Economics PhD Student
>> Terry College of Business
>> University of Georgia
>> Athens -30602.
>> *
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>> 
>
>
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>Heriot-Watt University is a Scottish charity
>registered under charity number SC000278.
>
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=======================================
Divya Balasubramaniam
Economics PhD Student
Terry College of Business
University of Georgia
Athens -30602.
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