Re: st: RE: xtivreg2, error 198

[Simon L�chinger <sluechinger@iew.unizh.ch>]

Mark,

thanks a lot for your answer. Yes, I think -nonest- and -dfadj- would 
suit my needs; unfortunately, I cannot realy test them, because my 
Stata dates from the time you wrote the -xtivreg2-, i.e. before -xtreg- 
had the cluster option. Of course, it would be fantastic if you could 
put -nonest- and -dfadj- into -xtivreg2- someday.

As a first approximation, I demeaned all my variables and estimated the 
model with -ivreg2- and the cluster option; I am aware that the SEs are 
too small and a dof adjustment is needed. My question is, however, 
whether this approach yields the same result as -xtivreg2- with the 
-nonest- option would.

Best regards

Simon



> The problem is interesting but tricky.  The usual classical and robust 
> var-cov matrix for the fixed effects estimator need a degrees of 
> freedom adjustment for the fixed effects (see any textbook treatment).
>
> The cluster-robust var-cov matrix doesn't need this adjustment, so 
> long as the panels (corresp. to the fixed effects) don't span more 
> than one cluster.
>
> The problem arises when the panels cut across clusters.  Some dof 
> adjustment is needed, but what should it be?  I don't know, and I 
> haven't seen any paper that describes exactly what it should be.  When 
> writing -xtivreg2-, I opted simply for the program to exit with error. 
>  Official -xtivreg- now has the -nonest- and -dfadj- options; these 
> didn't exist when I wrote -xtivreg2-.  You'll see that they allow you 
> to go between the extremes of no dof adjustment (which will give you 
> SEs that are too small) and a full dof adjustment (which will give you 
> "conservative" SEs that are on the large side).  Have a look at them 
> and see if they would suit your needs.  I could perhaps put them into 
> -xtivreg2-....
>
> Cheers,
> 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: m.e.schaffer@hw.ac.uk
> web: http://www.sml.hw.ac.uk/ecomes
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