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st: IV regress, fixed effects and clustering


From   Jeanne Lafortune <jeanne.lafortune@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: IV regress, fixed effects and clustering
Date   Sat, 13 Mar 2010 14:41:24 -0500

Dear all,

Has anybody ever encountered this problem? I'm running an instrumental variable regression:

xi: ivregress 2sls y (x=z) i.countyid, cluster(countyid)

using a data set with a lot of fixed effects (about 3000). I'm also clustering at the same level. In some cases, STATA encounters a problem and does not produce standard errors on the coefficients. I've tried clustering at a different level (using 50 or even 3 clusters) and the same result occurs. On the other hand, if I use no clustering or robust, standard errors are produced. I've run both the reduced form (reg y z i.countyid, cluster(countyid)) and the first stage (reg x z i.countyid, cluster(countyid)) and the results appear completely normal and all have standard errors.

Finally, I've also tried small changes to the specification, like adding a variable or two and the standards errors in some of these cases reappear.

If anybody has a clue why this may be happening, please let me know.

Best,

Jeanne
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