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Re: st: IV regression with panel data: random effects, clustered s.e.'s, postestimation tests


From   Austin Nichols <austinnichols@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: IV regression with panel data: random effects, clustered s.e.'s, postestimation tests
Date   Fri, 27 Apr 2012 10:25:01 -0400

Jana von Stein <JANAVS@umich.edu>:
For RE to be consistent, the effects u_i must be orthogonal to all
predictors, so you can ignore the u_i and estimate a pooled model.
I.e. use -ivreg2- (ignoring panel structure except for clustering on
country and/or year to account for correlated errors) and sacrifice a
little efficiency in favor of robustness against implausible
assumptions.

On Fri, Apr 27, 2012 at 9:21 AM, Jana von Stein <JANAVS@umich.edu> wrote:
> Hello,
>
> I have time-series panel (country) data and an endogenous independent
> variable. My sense is that the best way to handle this is to instrument, use
> a random effects model, and cluster on country. Does anyone know what
> command(s) I can use that will do (1) clustered s.e.'s and (2)
> postestimation tests (underidentification, Sargan, etc.) for instrument
> validity and identification?
>
> Xtivreg2 is great, but -- unless I'm missing some extra code someone's
> programmed -- isn't available for random or between effects. Fixed effects
> (available in xtivreg2) are out of the question, as some of my instruments
> don't vary over time within country.
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