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From |
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
RE: st: RE: Tricky IV-Problem and how do I correct Standard Errors in the Second Stage? |

Date |
Tue, 5 Jun 2012 17:51:54 +0100 |

Benjamin, > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of > Benjamin Niug > Sent: 31 May 2012 10:57 > To: statalist@hsphsun2.harvard.edu > Subject: Re: st: RE: Tricky IV-Problem and how do I correct > Standard Errors in the Second Stage? > > Hi Mark & statausers, > > Thanks for the answer - I see the point. Lets assume that I > would not account for fixed effects. Hence, I would have > variation. How would I be able to solve this problem? I think I answered this question already - the random effects estimator and the between estimator are both options. See -xtivreg-. --Mark > How > would I correct the standard errors. > > Best Benjamin > > > 2012/5/29 Schaffer, Mark E <M.E.Schaffer@hw.ac.uk>: > > Benjamin, > > > >> -----Original Message----- > >> From: owner-statalist@hsphsun2.harvard.edu > >> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of > Benjamin > >> Niug > >> Sent: 29 May 2012 10:37 > >> To: statalist@hsphsun2.harvard.edu > >> Subject: st: Tricky IV-Problem and how do I correct > Standard Errors > >> in the Second Stage? > >> > >> Hi Stata-users, > >> > >> Here is background information: > >> > >> - Dataset: I have a T=2 panel dataset with approximately 5000 > >> observations. > >> > >> - Sampling: Observations are sampled across different > localities (e.g. > >> 20 observation per locality). > >> > >> - Estimation Goal: I want to run a IV-regression accounting for FE > >> and clustering at the individual level. > >> > >> - I am using Stata 11. > >> > >> Here comes the issue: > >> > >> The explanatory variable that is endogenous (to be > >> instrumented) takes on the same values for observations in > the same > >> locality. Hence, I want to run the first stage regression using > >> averages of exogenous variables per locality as exogenous > >> instrumental variables. Hence, there would some further level of > >> aggregation in the first stage (with 5000/20=250 observations). > >> > >> Questions: > >> 1. Is there a Stata command that can estimate this somewhat tricky > >> Two-Stage Regression? (no Stata command that I am aware of). > > > > No, but it's not StataCorp's fault - it can't be done as specified. > > > > The problem is that the endogenous variable to be > instrumented doesn't > > vary by locality. Because it's locality-invariant, it will be > > absorbed by the fixed effects. There will be nothing left to > > instrument. Put another way, the FE estimator relies solely on > > within-locality variation. There is no such variation in > your endogenous regressor. > > > > Aside from finding a different explanatory variable that does have > > some within-locality variation, your only option is to use an > > estimator that exploits between-locality variation. The between > > estimator does this, as does the random effects estimator. Hybrid > > estimators are also possible (e.g., exploit only between > variation for > > some regressors and only within variation for others), but > you'd have to do those by hand. > > > > HTH, > > Mark > > > >> 2. If I run the first stage regression by hand: How do I > correct the > >> standard errors in the second stage? > >> > >> Thanks in advance. > >> > >> Best regards, > >> Benjamin > >> * > >> * 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/ > >> > > > > > > -- > > Heriot-Watt University is the Sunday Times Scottish > University of the > > Year 2011-2012 > > > > Heriot-Watt University is a Scottish charity registered > under charity > > number SC000278. > > > > > > * > > * 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/ > -- Heriot-Watt University is the Sunday Times Scottish University of the Year 2011-2012 Heriot-Watt University is a Scottish charity registered under charity number SC000278. * * 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/

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