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RE: st: RE: ivreg versus xtivreg


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: st: RE: ivreg versus xtivreg
Date   Fri, 12 Feb 2010 13:26:56 -0000

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 12:03 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: RE: ivreg versus xtivreg
> 
> Hi Mark:
> 
> Yes; I am using the 2-way cluster option. Fyi, the highest n-size for 
> the cluster is 192.

I take it that means you've got 192 clusters in one dimension.  Do you have a similarly large number in the second dimension?  In that case I agree, you're probably OK.

I'm also curious about the results of using 2-way clustering.  Does it make a big difference?

--Mark

> 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
> >>  >>>>
> >>  >>>>
> >>  >>>>
> >>  >>>>       
> >>  >>>>
> >>  >>>> *
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> >>  >>>>
> >>  >>>
> >>  >>> --
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