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From |
Augusto Cadenas <aug.cadenas@googlemail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: RE: ivreg2/xtivreg2, clustering, and the covariance matrix of moment conditions |

Date |
Fri, 20 Feb 2009 23:27:26 -0500 |

Dear Mark, thank you very much, this has clarified it. One more question: >> For example, I have N=8, T=12, a balanced panel (N*T=96), and want to >> have one cluster for each state (N), so M=8. The model I estimate has >> time and state fixed effects and only one regressor beyond that, so >> 1+7+11 coefficients to estimate. Is that because 19>8? > > If you are using xtivreg2, then you probably estimating a fixed effects > model with 8 fixed effects and 11 time dummies. The fixed effects are > NOT explicitly estimated - as usual with the FE model, they are > partialled out using the within transformation (demeaning). Thus you > are probably obtaining 1+11=12 explicit coefficient estimates. > > But your conclusion is basically correct. Because 12 (number of > coefficients, var-cov matrix of moment conditions is 12x12) > 8 (number > of clusters, rank of the var-cov matrix of moment conditions), the > var-cov matrix of moment conditions is not of full rank. How does the number of instruments factor into this calculation? In this specific example, I tried to partial out the year dummies, so I should be (and actually am) fine. The remeining number of coefficients is 1, which is greater than 8. But if I move to an overidentified case, and increase the number of instruments, at some point I get the message again. So, to be precise, I get the message with 9 instruments, but not with 8. So is the rule: # of regressors + # of (excl) instruments - 2 < # of clusters Thanks, AC * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: ivreg2/xtivreg2, clustering, and the covariance matrix of moment conditions***From:*Augusto Cadenas <aug.cadenas@googlemail.com>

**st: RE: ivreg2/xtivreg2, clustering, and the covariance matrix of moment conditions***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

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