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st: xtivreg, fe or fd (time-invariant instrument issue)


From   priya joshi <joship@dolphin.upenn.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: xtivreg, fe or fd (time-invariant instrument issue)
Date   Sun, 9 Jun 2013 00:40:18 -0400

I am trying to instrument for a competition measure, private market
share (psvw) with the number of private schools in 1982 (20 years ago)
(nvw1982) in a regression of mathematics score (mat) on control and
explanatory variables. the instrumental variable validity checks
worked out and the instrument seems to be a good predictor of the
competition measure.

I ran the following regressions and got the following results:

. mi estimate, cmdok post: xtivreg mat selective fees dalit enr female
pdropout snew permshare comproom yeardum2 yeardum3 yeardum4 yeardum5
(psvw = nvw1982),fe

Multiple-imputation estimates                   Imputations        =        10
                                                Number of obs      =      1029
Group variable: id_ss
                                                Number of groups   =       212
                                                Obs per group: min =         3
                                                               avg =       4.9
                                                               max =         5
                                                Average RVI        =    0.0911
                                                Largest FMI        =    0.3560
DF adjustment:   Large sample                   DF:     min        =     78.01
                                                        avg        =  20980.52
                                                        max        = 176681.52
Model F test:       Equal FMI                   F(  13,13901.3)    =     26.16
Within VCE type: Conventional                   Prob > F           =    0.0000

------------------------------------------------------------------------------
         mat |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
        psvw |   .8624825    .131875     6.54   0.000     .6037581    1.121207
   selective |  -.0278851   2.359545    -0.01   0.991    -4.652874    4.597103
        fees |   .3143015   .1130965     2.78   0.007     .0891442    .5394588
       dalit |  -1.938628   1.000959    -1.94   0.054    -3.912356    .0351003
         enr |   1.230128   .4774831     2.58   0.010     .2920233    2.168233
      female |  -.5203193   .9466472    -0.55   0.583    -2.376803    1.336164
    pdropout |  -.2030307   .2400717    -0.85   0.398    -.6740312    .2679699
        snew |   .0260768   .1462648     0.18   0.859    -.2606485    .3128021
   permshare |   .1165564    .150686     0.77   0.439    -.1792443    .4123572
    comproom |   .4153309   .9967468     0.42   0.677     -1.53827    2.368932
    yeardum2 |  -10.66012   .6900084   -15.45   0.000    -12.01264   -9.307597
    yeardum3 |  -8.298525   .6960532   -11.92   0.000    -9.662844   -6.934207
    yeardum4 |   -5.97942   .7454801    -8.02   0.000    -7.440567   -4.518273
    yeardum5 |          0  (omitted)
       _cons |   7.328137   8.134599     0.90   0.368    -8.628109    23.28438
------------------------------------------------------------------------------



I then tried to run the xtivreg2 on the same to get errors corrected
for heteroskedasticity and clustering. I got the following error
message:

" . mi estimate, cmdok post: xtivreg2 mat selective fees dalit enr
female pdropout snew permshar
> e comproom yeardum2 yeardum3 yeardum4 yeardum5 (psvw = nvw1982),fe

equation not identified; must have at least as many instruments not in
the regression as there are instrumented variables
an error occurred when mi estimate executed xtivreg2 on m=1
r(481);
"


I noted another Stata discussion on this issue
(http://www.stata.com/statalist/archive/2010-09/msg01344.html). The
discussion seems to conclude that the fact that the instrument was
time-invariant is the problem.


I wanted to ask if:

1. the xtivreg results for fe can be trusted - especially since this
is an important specification for my analysis.

2. if not, is there a way to do an fe iv regression for this
time-invariant instrumental variable? a time-invariant measure made
the most sense as an instrument since it is a lagged value of private
entry. should i instead construct a 5-year instrumental variable with
the number of private schools that existed in each year?

thank you,
Priya
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