Kate,
Date sent: Wed, 05 May 2004 00:48:52 -0700
From: Kate Ivanova <[email protected]>
Subject: RE: st: xtabond and OLS for separate years
To: [email protected]
Send reply to: [email protected]
> Thank you very much again, Mark and Antonio. I really appreciate all your
> comments.
>
> Now I could compare my OLS in cross section to between estimator, fixed
> effects, first differences [thanks to your help] and random effects. My
> income and income squared are significant in all OLS cross sections for 10
> years. They are also significant in the between-effects, random-effects and
> fixed effects models. However, the signs on all my coefficients are wrong in
> the fixed effects estimation. In the random effects model, the sign of the
> coefficient on my third variable, corruption, is wrong (though significant).
> So I am basically left with the between estimator as it seems that I do not
> have enough "within" variation in my explanatory variables.
There are other possible interpretations of why within and between
estimators can differ. One is that the individual effects are
correlated with the error term. Another is that the true model is
such that the impact of a long-run value (average) is different from
the impact of a temporary change - the Stata manual under xtreg has a
nice little example. Yet another is that you have an endogeneity
problem.
You should do a Hausman test, just to confirm that the differences
between the fixed and random are significant.
> Does that mean
> that I should not use xtabond or is it possible to get round this problem?
>
> As for the first-differenced results, only two of the variables are barely
> significant (at the 10% level) but the signs are wrong for both of them.
If first differencing without instrumenting is unsatisfactory, then
it's likely (but not guaranteed) that fd with instrumenting (e.g.,
xtabond) will also not work well.
Hope this helps.
--Mark
> Please let me know if you have any suggestions.
>
> Kate
>
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of Antonio Rodrigues
> Andres
> Sent: Tuesday, May 04, 2004 5:12 PM
> To: [email protected]
> Subject: RE: st: xtabond and OLS for separate years
>
> xtivreg using as instruments the same regressors gives the same result
> that doing it by hand
>
> Yes, you get the same results.
>
>
> *FIRST DIFFERENCES
> . xtivreg lsrt ($xvars=income unempl), fd
>
> First-differenced IV regression Number of obs =
> 276
> Group variable: country Number of groups =
> 21
>
> R-sq: within = 0.0096 Obs per group: min =
> 3
> between = 0.8987 avg =
> 16.9
> overall = 0.3945 max =
> 37
>
> chi2(2) =
> 4.12
> corr(u_i, Xb) = -0.5904 Prob > chi2 =
> 0.1277
>
> ----------------------------------------------------------------------------
> --
> d.lsrt | Coef. Std. Err. z P>|z| [95% Conf.
> Interval]
> -------------+--------------------------------------------------------------
> --
> income |
> D1 | -.0176139 .0088856 -1.98 0.047 -.0350292
> -.0001985
> unempl |
> D1 | -.0041495 .0044982 -0.92 0.356 -.0129659
> .0046669
> _cons | .005815 .005735 1.01 0.311 -.0054254
> .0170553
> -------------+--------------------------------------------------------------
> --
> sigma_u | .42097985
> sigma_e | .05951118
> rho | .98040789 (fraction of variance due to u_i)
> ----------------------------------------------------------------------------
> --
> Instrumented: income unempl
> Instruments: income unempl
>
> . regress dlsrt dincome dunempl
>
> Source | SS df MS Number of obs =
> 276
> -------------+------------------------------ F( 2, 273) =
> 2.06
> Model | .014576629 2 .007288314 Prob > F =
> 0.1297
> Residual | .966851358 273 .00354158 R-squared =
> 0.0149
> -------------+------------------------------ Adj R-squared =
> 0.0076
> Total | .981427987 275 .003568829 Root MSE =
> .05951
>
> ----------------------------------------------------------------------------
> --
> dlsrt | Coef. Std. Err. t P>|t| [95% Conf.
> Interval]
> -------------+--------------------------------------------------------------
> --
> dincome | -.0176139 .0088856 -1.98 0.048 -.0351068
> -.0001209
> dunempl | -.0041495 .0044982 -0.92 0.357 -.0130051
> .0047061
> _cons | .005815 .005735 1.01 0.312 -.0054755
> .0171054
> ----------------------------------------------------------------------------
> --
>
>
>
> >>> [email protected] 05/05/04 12:27 AM >>>
> Kate,
>
> Quoting Kate Ivanova <[email protected]>:
>
> > Hi Mark,
> >
> > I tried to run xtreg, fd (first-differencing without instrumenting)
> > as you
> > suggested but I could not find this option in the xtreg command.
> > There is
> > xtivreg, fd but then this is for estimation with instrumental
> > variables. Is
> > there any other way to estimate a first-differenced model without
> > instrumenting?
>
> Funny, I thought it would be there.
>
> I suppose you either have to try to trick xtivreg into running an
> uninstrumented equation by specifying the same instruments as regressors
> -
> and it might be too clever to be fooled - or you have to first
> difference
> by hand.
>
> --Mark
>
> > Thanks!
> >
> > Kate
> >
> > -----Original Message-----
> > From: [email protected]
> > [mailto:[email protected]] On Behalf Of Kate
> > Ivanova
> > Sent: Monday, May 03, 2004 10:02 AM
> > To: [email protected]
> > Subject: RE: st: xtabond and OLS for separate years
> >
> > Mark,
> >
> > Thank you very much for your suggestions. They are very helpful.
> > Yes, I did
> > mean OLS in cross-section so I'll now compare it to the estimators
> > you
> > specified below. I'll get back again when I have the results. Thanks
> > a lot!
> >
> > Kate
> >
> > -----Original Message-----
> > From: [email protected]
> > [mailto:[email protected]] On Behalf Of Mark
> > Schaffer
> > Sent: Monday, May 03, 2004 4:09 AM
> > To: [email protected]
> > Subject: Re: st: xtabond and OLS for separate years
> >
> > Kate,
> >
> > Date sent: Sat, 01 May 2004 17:59:00 -0700
> > From: Kate Ivanova <[email protected]>
> > Subject: st: xtabond and OLS for separate years
> > To: [email protected]
> > Send reply to: [email protected]
> >
> > > Hi,
> > >
> > > I am confused by the results I get using xtabond. I have a panel
> > of 116
> > > countries over 10 years and when I run separate regressions for
> > each year
> > > using OLS, my variables (income and income squared) are highly
> > significant
> > > (at a 0.001 level). But when I run xtabond with one lag of the
> > dependent
> > > variable, they are not significant at all. I wonder why I have
> > such a
> > > difference between the results. Any help, any ideas would be
> > greatly
> > > appreciated.
> >
> > It's hard to tell exactly what's going on from the info you've
> > provided, but there are at least two possibilities:
> >
> > 1. You are comparing OLS in cross-section (yes?) and xtabond, which
> >
> > you can think of as a first-difference estimator with instrumenting.
> >
> > Each of your cross-sections uses the cross-sectional variation
> > across
> > 116 countries in any year; xtabond using only the time-series
> > variation within countries.
> >
> > A better comparison would be to leave the instrumenting out of it
> > for
> > the moment, and compare:
> >
> > OLS period-by-period (uses only cross-sectional variation)
> > Between estimator (also uses only cross-sectional variation)
> > Fixed effects (uses only "within", i.e., time-series, variation)
> > First differences (also uses only "within" variation)
> > Random effects (uses both "within" and "between" variation)
> >
> > 2. xtabond is an IV estimator, and the results you get will depend
> >
> > on the instrumenting. You can compare the xtabond results with the
> >
> > results from first-differencing without instrumenting (xtreg, fd),
> >
> > for example, and see what happens.
> >
> > Hope this helps.
> >
> > --Mark
> >
> > >
> > > Kate
> > >
> > >
> >
> >
> > Prof. Mark E. Schaffer
> > Director
> > Centre for Economic Reform and Transformation
> > Department of Economics
> > School of Management & Languages
> > Heriot-Watt University, Edinburgh EH14 4AS UK
> > 44-131-451-3494 direct
> > 44-131-451-3008 fax
> > 44-131-451-3485 CERT administrator
> > http://www.som.hw.ac.uk/cert
> > *
> > * For searches and help try:
> > * http://www.stata.com/support/faqs/res/findit.html
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> >
> > *
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> >
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> >
>
>
>
> Prof. Mark Schaffer
> Director, CERT
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS
> tel +44-131-451-3494 / fax +44-131-451-3008
> email: [email protected]
> web: http://www.sml.hw.ac.uk/ecomes
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
44-131-451-3008 fax
44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert
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