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RE: st: RE: RE: xtivreg2 -- Instruments dropped


From   DE SOUZA Eric <eric.de_souza@coleurope.eu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   RE: st: RE: RE: xtivreg2 -- Instruments dropped
Date   Mon, 17 Jan 2011 09:50:11 +0100

You are misunderstanding the jargon.
Let y be regressed on X  and W, where X is endogenous and W is exogenous.
Let Z be the exogenous variables used as instruments that are not part of the regression equation.
W and Z are all instruments: 
W is referred to as the included (in the regression equation) instruments
Z is referred to as the excluded (from the regression equation) instruments
The jargon comes from simultaneous equation models.
In a way one can say that W instruments itself

Eric


Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu


-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Ivan Png
Sent: 17 January 2011 00:18
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: RE: RE: xtivreg2 -- Instruments dropped

Dear Mark:

Many thanks.  Sorry, I introduced the space when cutting and pasting from my STATA do file into the email.  I could run the xtivreg2.

Thanks for the below: you have replicated my problem exactly.  The next to last line of your output reads, " Excluded instruments: L.govr_r "
-- that's precisely my problem.  Why did xtivreg2 exclude the instrument that I wanted in (viz, L.govr_r)?  This problem did not arise with xtivreg.

I encountered the same with other instruments that I tried for the endogenous variable L.utsa.  I checked all the instruments by using OLS to regress utsa on the various instruments -- they were significant in the OLS.  So, I'm baffled why xtivreg2 would exclude them.


On Sun, Jan 16, 2011 at 10:29 PM, Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> wrote:
> Ivan,
>
> I used your corrected dataset, and made some progress in tracking down the problem, but there are still aspects I don't understand.
>
> 1.  Easy part: to identify your versions of xtivreg2, ivreg2, xtivreg, 
> etc., you use the -which- command.  It's best to use the -all- option 
> with it, in case there are multiple versions lurking on your machine.  
> For example,
>
> . which xtivreg, all
>
> C:\Program Files\Stata11\ado\updates\x\xtivreg.ado
> *! version 1.5.9  11nov2009
>
> C:\Program Files\Stata11\ado\base\x\xtivreg.ado
> *! version 1.5.7  17jun2009
>
> NB: The dulpicate versions above aren't a problem for an official program like -xtivreg-.  When you update your Stata and a do file gets updated, the update goes in the updates folder and the original stays in the base folder.
>
> 2.  I can't run your example, using either -xtivreg2- or official -xtivreg-.  The reason is a bug, or perhaps "inflexibility", in the parsing done by -xtivreg2- and -xtivreg-.  It is very simple: if you use a space between the end of an -if- statement and the comma, both -xtivreg2- and -xtivreg- complain in a very uninformative way:
>
> First, -xtivreg2-:
>
> . xi: xtivreg2 xrdr_ln revtr_ln mktbook_mm ebitdar_ln     ///
>>         taxcred (L.utsa = L.govr_r) i.year ///
>>         if xrdr_count >= 6  , fe cluster(state_sic)
> i.year            _Iyear_1976-2006    (naturally coded; _Iyear_1976 
> omitted)
> 6  invalid name
> r(198);
>
> end of do-file
>
> r(198);
>
> Now official -xtivreg-:
>
> . xi: xtivreg xrdr_ln revtr_ln mktbook_mm ebitdar_ln      ///
>>         taxcred (L.utsa = L.govr_r) i.year ///
>>         if xrdr_count >= 6  , fe cluster(state_sic)
> i.year            _Iyear_1976-2006    (naturally coded; _Iyear_1976 
> omitted)
> 6  invalid name
> r(198);
>
> end of do-file
>
> r(198);
>
> But delete the spaces between 6 and the comma, and it works:
>
> . xi: xtivreg2 xrdr_ln revtr_ln mktbook_mm ebitdar_ln     ///
>>         taxcred (L.utsa = L.govr_r) i.year ///
>>         if xrdr_count >= 6, fe cluster(state_sic)
> i.year            _Iyear_1976-2006    (naturally coded; _Iyear_1976 
> omitted) Warning - singleton groups detected.  295 observation(s) not used.
> Warning - collinearities detected
> Vars dropped:  _Iyear_2006
>
> FIXED EFFECTS ESTIMATION
> ------------------------
> Number of groups =      3198                    Obs per group: min =         
> 2
>                                                               avg =       
> 8.5
>                                                               max =        
> 30
>
> IV (2SLS) estimation
> --------------------
>
> Estimates efficient for homoskedasticity only Statistics robust to 
> heteroskedasticity and clustering on state_sic
>
> Number of clusters (state_sic) =   1471               Number of obs =    
> 27044
>                                                      F( 34,  1470) =     
> 3.85
>                                                      Prob > F      =   
> 0.0000 Total (centered) SS     =  251.0415486                Centered 
> R2   =   0.2476 Total (uncentered) SS   =  251.0415486                
> Uncentered R2 =   0.2476 Residual SS             =  188.8924922                
> Root MSE      =     .089
>
> ----------------------------------------------------------------------
> --------
>             |               Robust
>     xrdr_ln |      Coef.   Std. Err.      z    P>|z|     [95% Conf. 
> Interval]
> -------------+--------------------------------------------------------
> -------------+--------
>        utsa |
>         L1. |   .0174583   .0902999     0.19   0.847    -.1595263    
> .1944429
>             |
>    revtr_ln |   .1265504   .0205411     6.16   0.000     .0862907    
> .1668102
>  mktbook_mm |   .0149745   .3796314     0.04   0.969    -.7290894    
> .7590385
>  ebitdar_ln |   .0408917   .0159209     2.57   0.010     .0096873    
> .0720961
>     taxcred |  -.1079932   .5174864    -0.21   0.835    -1.122248    
> .9062615
>  _Iyear_1977 |  -.0313348   .0448701    -0.70   0.485    -.1192785     
> .056609 ...
> <output edited for brevity>
> ...
>  _Iyear_2005 |  -.0105457   .0033898    -3.11   0.002    -.0171896   
> -.0039017
> ----------------------------------------------------------------------
> -------- Underidentification test (Kleibergen-Paap rk LM statistic):             
> 46.831
>                                                   Chi-sq(1) P-val =    
> 0.0000
> ----------------------------------------------------------------------
> -------- Weak identification test (Cragg-Donald Wald F statistic):              
> 202.397
>                         (Kleibergen-Paap rk Wald F statistic):         
> 53.412 Stock-Yogo weak ID test critical values: 10% maximal IV size             
> 16.38
>                                         15% maximal IV size              
> 8.96
>                                         20% maximal IV size              
> 6.66
>                                         25% maximal IV size              
> 5.53
> Source: Stock-Yogo (2005).  Reproduced by permission.
> NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
> ----------------------------------------------------------------------
> -------- Hansen J statistic (overidentification test of all 
> instruments):         0.000
>                                                 (equation exactly 
> identified)
> ----------------------------------------------------------------------
> --------
> Instrumented:         L.utsa
> Included instruments: revtr_ln mktbook_mm ebitdar_ln taxcred 
> _Iyear_1977 ...
> <output edited for brevity>
> ...                      _Iyear_2002 _Iyear_2003 _Iyear_2004 
> _Iyear_2005 Excluded instruments: L.govr_r Dropped collinear:    
> _Iyear_2006
> ----------------------------------------------------------------------
> --------
>
> 3.  I still don't understand what you mean when you say
>
>> IP: I meant instruments -- in the sense that I used different 
>> instruments in various specifications, and each one was dropped.
>
> I'm pretty sure you don't mean that -xtivreg2- drops every excluded instrument but still reports a coefficient for an endogenous regressor!  But then, what do you mean?
>
> But maybe it doesn't matter if simply eliminating the spaces between 6 and the comma solves your problem.
>
> Best wishes,
> Mark
>
>> -----Original Message-----
>> From: owner-statalist@hsphsun2.harvard.edu
>> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Ivan Png
>> Sent: 16 January 2011 03:25
>> To: statalist@hsphsun2.harvard.edu
>> Subject: Re: st: RE: RE: xtivreg2 -- Instruments dropped
>>
>> Sorry, Mark.  I've updated the data-set.
>>
>> On Sat, Jan 15, 2011 at 10:29 PM, Schaffer, Mark E 
>> <M.E.Schaffer@hw.ac.uk> wrote:
>> > Ivan,
>> >
>> > I had the same problem as Eric.  And there must be
>> something else wrong, since there's only one instrument listed 
>> (L.govr_r) and you refer to "instruments".
>> >
>>
>> IP: I meant instruments -- in the sense that I used different 
>> instruments in various specifications, and each one was dropped.
>>
>> > Did xtivreg2 report collinearities among your instruments
>> as a reason for dropping some?  Did xtivreg?  If so, were the dropped 
>> variables the same?
>>
>> IP; Neither reported collinearities.
>>
>> > You might also want to compare the first-stage regressions
>> of xtivreg2 and xtivreg.
>> >
>> > Oh, and tell us which versions of xtivreg2, xtivreg and
>> Stata you are using.
>>
>> IP: Stata/IC 10.1.  Sorry, please advise how to identify version of
>> xtivreg2 and xtivreg
>>
>>
>> > --Mark
>> >
>> >> -----Original Message-----
>> >> From: owner-statalist@hsphsun2.harvard.edu
>> >> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of
>> DE SOUZA
>> >> Eric
>> >> Sent: 15 January 2011 12:02
>> >> To: statalist@hsphsun2.harvard.edu
>> >> Subject: st: RE: xtivreg2 -- Instruments dropped
>> >>
>> >> Check the instruction you have posted:
>> >> govr_r does not exist
>> >>
>> >>
>> >>
>> >> Eric de Souza
>> >> College of Europe
>> >> Brugge (Bruges), Belgium
>> >> http://www.coleurope.eu
>> >>
>> >>
>> >> -----Original Message-----
>> >> From: owner-statalist@hsphsun2.harvard.edu
>> >> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Ivan 
>> >> Png
>> >> Sent: 15 January 2011 12:43
>> >> To: statalist@hsphsun2.harvard.edu
>> >> Subject: st: xtivreg2 -- Instruments dropped
>> >>
>> >> Dear Stata-list:
>> >>
>> >> I'm having difficulty with xtivreg2
>> >>
>> >> Each time, the system drops the instruments for the
>> variable L.utsa.
>> >> utsa is a state-time variable that varies across states
>> and times. I
>> >> checked the instruments: they are state- and time-varying.
>>   I don't
>> >> understand why the system drops the instruments.  (I tried xtivreg 
>> >> and it works, but I would like to use xtivreg2 so that I can get 
>> >> cluster standard errors and the diagnostics for weak instruments).
>> >>
>> >>
>> >> Please help.  Many thanks!
>> >>
>> >> Data-set:
>> >> http://www.comp.nus.edu.sg/~ipng/research/company_wrkg.dta
>> >>
>> >>
>> >> Code:
>> >> . xtset gvkey year
>> >>
>> >> . xi: xtivreg2 xrdr_ln revtr_ln mktbook_mm ebitdar_ln taxcred ///
>> >>     (L.utsa = L.govr_r) i.year trend_AL - trend_WY ///
>> >>     if xrdr_count >= 6  , fe cluster(state_sic)
>> >>
>> >>
>> >>
>> >>
>> >> --
>> >> Ivan Png
>> >> National U of Singapore
>> >>
>> >>
>> >>
>> >>
>> >> --
>> >> Skype: ipng00
>> >> T: +65 6516 6807
>> >>
>> >>
>> >>
>> >> --
>> >> Skype: ipng00
>> >> T: +65 6516 6807
>> >>
>> >> *
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>> >>
>> >> *
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>> >>
>> >
>> >
>> > --
>> > Heriot-Watt University is a Scottish charity registered
>> under charity
>> > number SC000278.
>> >
>> >
>> > *
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>>
>>
>>
>> --
>> Skype: ipng00
>> T: +65 6516 6807
>>
>> *
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>>
>
>
> --
> Heriot-Watt University is a Scottish charity registered under charity 
> number SC000278.
>
>
> *
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> *   http://www.stata.com/help.cgi?search
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>



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