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st: Clustered standard errors: Insufficient observations


From   "Jost Heckemeyer" <Heckemeyer@zew.de>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Clustered standard errors: Insufficient observations
Date   Sat, 14 May 2011 19:30:17 +0200

Dear Statalisters,
I want to estimate a large cross-country panel model (> 50.000 firm year
observations). As some of my main explanatory variables vary mainly at
the country-level (e.g. tax rates) I cluster standard errors within
countries, not within firms - as it is generally recommended to do. 

However, as soon as I estimate a firm fixed effects model (xtreg, fe
with option cluster(country), fe are at the firm level) it does not work
anymore and it just gives me the error "insufficient observations".
xtreg, re and all pooled estimators all work well with cluster(country).
xtreg, fe also works with clustering within firms. But this is not what
I want. It would be great if anyone coule help me with this problem.
What can I do?

Thank you so much!
Jost
Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW), L7,1 68161
Mannheim 
Sitz der Gesellschaft: Mannheim Amtsgericht Mannheim HRB 6554
Aufsichtsratsvorsitzender: Gerhard Stratthaus MdL, Finanzminister a.D.
Geschaeftsfuehrer: Prof. Dr. Dr. h.c. mult. Wolfgang Franz, Thomas Kohl
Centre for European Economic Research L7,1 68161 Mannheim Germany
Seat of the Company: Mannheim Local Court Mannheim HRB 6554
Chairman of the Supervisory Board: Gerhard Stratthaus MdL, Minister,
ret.
Executive Directors: Prof. Dr. Dr. h.c. mult. Wolfgang Franz, Thomas
Kohl
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