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


From   Jana von Stein <janavs@umich.edu>
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 10:44:38 -0400

Dear Austin,

Ah, I see. That makes good sense. Is there a good stats source you might point me to on this? This is sort of new territory for me and I want to make sure I understand the statistics/theory behind what choices I'm making. (I.e., on the u_i in particular and that [a] not okay to to xt R.E. in the presence of non-orthogonal u_i; and [b] that it is kosher(ish) to ignore panel structure and use R.E. ivreg?

Does the same apply to between effects?

Thanks,
Jana
On Apr 27, 2012, at 10:25 AM, Austin Nichols wrote:

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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