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st: ivreg versus xtivreg


From   sara borelli <saraborelli77@yahoo.it>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: ivreg versus xtivreg
Date   Thu, 11 Feb 2010 18:32:09 +0000 (GMT)

Dear members, 
I am running the following regressions in STATA8.2:
CRit =  a*Xit +  b*Zit  + (state by year fixed effects)  + (county fixed effects), cluster(county)

CRit= crime rate in county i year t
Xit = endogenous regressor
Zit = set of 7 exogenous regressors
state by year fixed effects = interactions between indicators for each state and year

I instrument Xit using Wit
There are 246 counties, 10 states, 8 years
I have been running this model with two commands

xi:   ivreg  CRit  (Xit=Wit)  Zit   (state by year fixed effects)  i.county, cluster(county)
xtivreg2  CRit  (Xit=Wit)  Zit   (state by year fixed effects)  i.county, fe i.(county) cluster(county)

the two commands give exactly the same coefficient, and just slightly different std errors, but after xtivreg2 I get the following message:
Error: estimated covariance matrix of moment conditions not of full rank;
overidentification statistic not reported, and standard errors and       model tests should be interpreted with caution. Possible causes:  singleton dummy variable (dummy with one 1 and N-1 0s or vice versa) fwl option may address problem.

I noticed that 2 states have a number of counties (clusters)  lower than the number of years available. By dropping these two states STATA run the xtivreg2 without giving the error message.

I have read the help file and FAQ and I think something is going with those state by year effects that creates a kind of singleton dummy problem, but I am not sure 
Any help would be appreciated

thank you
sara



      

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