st: ivreg with dummies vs. xtivreg, fe

[Subramaniam Ramanarayanan <s-ramanarayanan@kellogg.northwestern.edu>]

Hi,

I am working on a dataset where the unit of observation is a patient in a 
particular year. For each patient, I observe the physician operating on the 
patient, and the hospital the patient is treated in. The data does not 
contain information that identifies patients - I only know the identity of 
the physician and the hospital. In the example below, doc 1 treats 2 
patients in hospital 1 in 1999 and one patient in hospital 3 in 2000.

Row     Physician       Hospital        Year
------- --------------- ------------    --------
1       Doctor 1        Hospital 1      1999
2       Doctor 1        Hospital 1      1999
3       Doctor 2        Hospital 1      1999
4       Doctor 1        Hospital 3      2000
5       Doctor 3        Hospital 2      2000

I would like to run an instrumental variables OLS regression that includes 
Fixed Effects for physician, hospital and year. Are the following two 
specifications equivalent?

Spec 1:         ivreg depvar (endog var = instrument) yeardummies 
hospitaldummies physiciandummies

Spec 2: xtivreg depvar (endog var = instrument) yeardummies 
hospitaldummies, i(physician id) fe

I am not sure if I can use physician id as the "i" variable because the 
dataset is at the level of a patient, and not at the level of a physician.

I am getting different estimates from these two specifications...and am not 
sure which is the correct one to use. If one wants to include multiple 
Fixed Effects in the same regression, then how does one choose the i variable?

Any help will be hugely appreciated.

Thanks a lot!
subbu






____________________________________________________________
Subramaniam Ramanarayanan
Ph.D. Candidate
Managerial Economics & Strategy
Kellogg School of Management
Northwestern University

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