RE: st: ivregress with2sls and clustered standard errors

[DE SOUZA Eric <eric.de_souza@coleurope.eu>]

If Susan partials out the school dummies this would get rid of the dimensionality problem


Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu



-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Stas Kolenikov
Sent: 26 March 2011 22:29
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: ivregress with2sls and clustered standard errors

Yes, that's the aspect I mentioned first: you can either do clustered standard errors/GMM weight matrix, or school fixed effect dummies.

On Sat, Mar 26, 2011 at 4:22 PM, Averett, Susan L <averetts@lafayette.edu> wrote:
> I didn't have any luck with the wmatrix option. In that case, I actually am told that I have no observations. Could this be because I am using school fixed effects as well as trying to cluster on schools?
>
> Susan Averett
> ----- Original Message -----
> From: "Stas Kolenikov" <skolenik@gmail.com>
> To: statalist@hsphsun2.harvard.edu
> Sent: Saturday, March 26, 2011 4:35:21 PM
> Subject: Re: st: ivregress with2sls and clustered standard errors
>
> Susan Averett is working with education data estimating an 
> instrumental variable model with standard errors clustered at the 
> school level, and is looking for ways to conduct overidentification 
> tests.
>
> On Sat, Mar 26, 2011 at 3:08 PM, Averett, Susan L 
> <averetts@lafayette.edu> wrote:
>> I am trying to run a model using ivregress with 2sls as my estimator.
>> I have a data set of individuals who are clustered in various schools.
>> I am using school fixed effects in my model but I am trying to 
>> cluster my standard errors on the school variable
>
> If you used fixed effect dummies for schools, then you would have more 
> regressors than you have clusters, which should've triggered an error 
> message somewhere.
>
>> AND also obtain the overidentification tests from
>>
>> estat overid
>>
>> However, when I use the cluster command, I get an error:
>>
>> robust tests of overidentifying restrictions after 2SLS
>>  estimation not available with cluster-robust standard errors
>>
>> I do not get this same error if I use robust standard errors.
>
> Apparently, the way -overid- is currently coded, it does not even try 
> to compute the overidentification test with clustered standard errors.
> Either it was too difficult to code, or, more likely, there was (and 
> in all likelihood, still no) solid theory regarding overid tests with 
> clustered data.
>
>> What is the option if this error is received? Is is possible I do not 
>> need to cluster my standard errors?
>
> I see three ways to get out of this.
>
> 1. At a descriptive level, you can compare the standard errors with 
> and without clustering (-robust- only). If they are not drastically 
> different (indicating that the schools are rather alike, and student 
> homogeneity within schools does not affect your results much), then 
> you can probably use the test without clustering, although of course 
> you would need to describe everything in detail to convince the 
> readers of your paper.
>
> 2. You can reverse engineer -overid-, figure how this test is 
> obtained, and compute it by hand.
>
> 3. You will get the overidentification test from -gmm- (assuming you 
> are using Stata 11 which you did not state). See examples in the 
> manual as to how run the analogue of -ivregress-; you would need to 
> specify the -wmatrix(cluster school) to obtain both estimates that are 
> efficient under clustering, and the overid test (using -estat 
> overid-).
>
> --
> Stas Kolenikov, also found at http://stas.kolenikov.name Small print: 
> I use this email account for mailing lists only.
>
> *
> *   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/
>
> *
> *   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/
>



--
Stas Kolenikov, also found at http://stas.kolenikov.name Small print: I use this email account for mailing lists only.

*
*   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/

*
*   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/