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Re: st: RE: problem using xtivreg2 without instruments


From   Samia Tavares <[email protected]>
To   [email protected]
Subject   Re: st: RE: problem using xtivreg2 without instruments
Date   Sat, 14 Apr 2007 17:44:16 -0400

Mark,

No, it didn't warn about anything. The error message I included was the only thing it said.

Samia

On Apr 14, 2007, at 5:24 PM, Schaffer, Mark E wrote:


Samia,

-----Original Message-----
From: [email protected]
[mailto:[email protected]] On Behalf Of
Samia Tavares
Sent: 14 April 2007 21:24
To: [email protected]
Subject: Re: st: RE: problem using xtivreg2 without instruments

Mark,

I tried without the weight as you suggested, and the standard
errors from xtreg were slightly higher than those with
xtivreg2. In fact, I tried dropping one of the interaction
variables, which eliminated the error message, and still the
standard errors were different (xtreg slightly higher than
xtivreg2). Any ideas what could be wrong?
Did -xtivreg2- warn you about singleton groups being detected and
observations not being used?  If there are any groups with just one
observation, the fixed effects estimator can't use them (the
mean-deviations transformation makes the observation a useless row of
zeros).  -xtivreg2- notes this and subtracts them from the number of
observations reported, whereas official -xtivreg- doesn't.

--Mark

Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3296
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes


Thanks for the help!

Samia

On Apr 14, 2007, at 1:16 PM, Schaffer, Mark E wrote:

Samia,

-----Original Message-----
From: [email protected]
[mailto:[email protected]] On Behalf Of Samia
Tavares
Sent: 14 April 2007 17:33
To: [email protected]
Subject: st: problem using xtivreg2 without instruments

Hi everyone,

I'm trying to estimate a fixed effects regression with analytical
weights. I understand that this is not possible with xtreg
(only if I
were using random effects), so I am using xtivreg2
instead, since the
help file indicated that I could use it without
instruments to obtain
the same results I would get with xtreg. The equation I am
estimating
is of the form:

xi:xtivreg2 y dummy control i.year*continent1 i.year*continent2
i.year*continent3 i.year [aweight=variance^-1], fe cluster(country)

When I estimate this, I get the following:

Error: estimated covariance matrix of moment conditions
not of full
rank;
        overidentification statistic not reported, and standard
errors and
        model tests should be interpreted with caution.
Possible causes:
        singleton dummy variable (dummy with one 1 and N-1
0s or vice
versa)
fwl option may address problem.

I read in the FAQs about this error, but in the context of
including
instruments with xtivreg2. I have checked the dataset and
none of the
dummy variables (dummy, continent, continent2, continent3)
contain a
singleton. Obviously since I have no instruments, I am not
concerned
about the overidentification statistic, but I want to be
sure about
the standard errors.

When I estimate the model without the year-continent
interactions, I
don't get this error. However, I do wish to include them
to check for
the robustness of my results.

Any help will be greatly appreciated!!
The error message is correct, I think.  Most likely, all the
interactions mean that your var-cov matrix is not of full
rank because
you have more regressors than clusters.  Since you're not doing any
instrumenting or efficient GMM, this will probably cause you only
minor problems at most - you won't, for example, be able to
test the
joint significance of more variables than clusters.

A useful cross-check would be to estimate using xtivreg2 without
weighting and using xtreg, both with cluster.  The SEs
should be the
same, but xtivreg2 will again warn you.

Cheers,
Mark

Samia



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