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Re: st: RE: ivreg versus xtivreg


From   John Antonakis <john.antonakis@unil.ch>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: RE: ivreg versus xtivreg
Date   Fri, 12 Feb 2010 13:03:09 +0100

Hi Mark:

Yes; I am using the 2-way cluster option. Fyi, the highest n-size for the cluster is 192.

Glad to hear that the SEs are probably OK.

Best regards,
John.

____________________________________________________

Prof. John Antonakis, Associate Dean Faculty of Business and Economics
Department of Organizational Behavior
University of Lausanne
Internef #618
CH-1015 Lausanne-Dorigny
Switzerland

Tel ++41 (0)21 692-3438
Fax ++41 (0)21 692-3305

Faculty page:
http://www.hec.unil.ch/people/jantonakis

Personal page:
http://www.hec.unil.ch/jantonakis
____________________________________________________



On 12.02.2010 12:50, Schaffer, Mark E wrote:
John,

-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of John Antonakis
Sent: Friday, February 12, 2010 9:23 AM
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: RE: ivreg versus xtivreg

Hi Mark:

I have a similar error; however, the message I get is:

Warning: 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:
number of clusters insufficient to calculate robust covariance matrix singleton dummy variable (dummy with one 1 and N-1 0s or vice versa)
partial option may address problem.

Note, I have modeled two dimensions of clustering

Do you mean you're using the new 2-way cluster option?

(and put all my fixed-effects in the partial option). Thus, I am correct in saying that the z test for a particular coefficient estimate is still interpretable.

Probably.  I can think of some special cases where things can go wrong (these are what motivated the writing of the warning message).  You might have a small number of clusters (so the asymptotics are dodgy) or a singleton dummy which would mean you couldn't do a test on the significance of the coefficient (of course, you couldn't do that anyway).  But most likely the SEs are OK.

--Mark

Best,
J.

____________________________________________________

Prof. John Antonakis, Associate Dean
Faculty of Business and Economics
Department of Organizational Behavior
University of Lausanne
Internef #618
CH-1015 Lausanne-Dorigny
Switzerland

Tel ++41 (0)21 692-3438
Fax ++41 (0)21 692-3305

Faculty page:
http://www.hec.unil.ch/people/jantonakis

Personal page:
http://www.hec.unil.ch/jantonakis
____________________________________________________



On 12.02.2010 09:55, Schaffer, Mark E wrote:
 > Sara,
 >
 >> -----Original Message-----
 >> From: owner-statalist@hsphsun2.harvard.edu
 >> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of
 >> sara borelli
 >> Sent: 12 February 2010 07:58
 >> To: statalist@hsphsun2.harvard.edu
 >> Cc: Schaffer, Mark E
 >> Subject: R: st: RE: ivreg versus xtivreg
 >>
 >> Hi Mark,
 >> I am sorry I did not understand your answer...and I think it
 >> is because I I made a typo in writing the command and I did
 >> not explain myself clearly. I do NOT include  i.county  in
 >> xtivreg2. So I reformulate my question:
 >>
 >> xtivreg2  CRit  (Xit=Wit)  Zit   (state by year fixed effects),
 >> fe i(county), cluster(county)
 >>
 >> gives the error message " 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"
 >>
 >> but the same command xtivreg2 without state by year effects:
 >> xtivreg2  CRit  (Xit=Wit)  Zit, fe i(county), cluster(county)
 >>  does NOT report the above error message
 >>
 >> I do not uderstand why the inclusion of state by year fe
 >> caused that error message
 >
 > I think your explanation in your earlier email is probably right:
 >
 >> 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
 >
> And the question is, should you worry about it? The VCV should still be OK for tests of, say, one parameter at a time. So long as you are aren't trying to do something that requires a full-rank VCV (like 2-step GMM, or using an overid stat, or joint testing of all the coeffs), you're OK, I think.
 >
> Memo to self: calling this an "error" in the output is possibly overstating the issue; maybe "warning" is better.
 >
 > --Mark
 >
 >> thank you
 >> sara
 >>
 >>
 >>
>> --- Gio 11/2/10, Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> ha scritto:
 >>
 >>> Da: Schaffer, Mark E <M.E.Schaffer@hw.ac.uk>
 >>> Oggetto: st: RE: ivreg versus xtivreg
 >>> A: statalist@hsphsun2.harvard.edu
 >>> Data: Giovedì 11 febbraio 2010, 19:43
 >>> Sara,
 >>>
 >>>> -----Original Message-----
 >>>> From: owner-statalist@hsphsun2.harvard.edu
 >>>> [mailto:owner-statalist@hsphsun2.harvard.edu]
 >>> On Behalf Of
 >>>> sara borelli
 >>>> Sent: Thursday, February 11, 2010 6:32 PM
 >>>> To: statalist@hsphsun2.harvard.edu
 >>>> Subject: st: ivreg versus xtivreg
 >>>>
 >>>> 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
 >>> It's not a problem.
 >>>
>>> You will note that xtivreg2 does not report the fixed effect dummy
 >>> variables.
 >>>
 >>> xi: ivreg2 explicitly includes the dummies, and the
 >> coefficients are
 >>> reported.
 >>>
 >>> The warning message reported by ivreg2 is triggered by the
 >> fact that
 >>> there are now many more rows/columns in the VCV, the new,
 >> extended VCV
 >>> is no longer full rank.
 >>>
 >>> In fact, the coefficients and standard errors for the
 >> dummies aren't
>>> consistent anyway (under the usual panel data assumptions - this is
 >>> the "incidental parameters problem").  So you really aren't
 >> interested
 >>> in the extended VCV anyway.
 >>>
 >>> HTH,
 >>> Mark
>>> >>>> thank you
 >>>> sara
 >>>>
 >>>>
 >>>>
>>>> >>>>
 >>>> *
 >>>> *   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/
 >>>>
 >>>
 >>> --
 >>> Heriot-Watt University is a Scottish charity registered
 >> under charity
 >>> number SC000278.
 >>>
 >>>
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 >>
>> >>
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 >
 >

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