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st: XTOVERID after XTHTAYLOR Warning - endogenous variable(s) collinear with instruments, 3200 conformability error, and other errors
Fri, 11 Nov 2011 10:16:36 +0100
Dear Statalist users,
After using xtoverid I receive the following 4 warnings: (1) "endogenous
variable(s) collinear with instruments" ; (2) "*: 3200 conformability
error"; (3) "s_egmm(): - function returned error", and (4) "<istmt>: -
function returned error".
I use xtoverid to access the quality of the instruments after estimating
an unbalanced panel using the xthtaylor command. In my estimations I
also use time-dummies. For each individual in my data set I have a
maximum of 52 monthly observations, so I included 51 time dummies to
absorb aggregate time effects.
From an earlier discussion with Mark Schaffer I understood that when
running xthtaylor with an unbalanced panel, 3 instruments (a mean, a
demeaned and a GLS transformation) are created from the time-varying
exogenous variables. In an unbalanced panel the GLS transformation is
added to the estimation as another endogenous variable. Given that time
dummies are also time-varying and exogenous, they will be transformed
and used as instruments. The warnings I receive very likely have to do
with these GLS transformed time dummies that are added as endogenous
variables. When limiting my estimation to a balanced panel, only the 1st
error message ("Warning - endogenous variable(s) collinear with
instruments") remains, but xtoverid provides me with useful output..
When removing the time dummies and using my whole unbalanced panel all
error messages disappear, except that after all the output Stata returns
(" xtoverid error: internal reestimation of eqn differs from original"),
but I ignored this so far.
My question is, what can I do? I want to include the time-dummies and
use all my data (for most individuals I do not have 52 monthly
observations, so my data set would be severely reduced when using only
the balanced data set). Another issue is that it feels a little awkward
to use time dummies as instruments, as they do not have any cross
sectional variation, but that's what xthtaylor does.