Alejandro,
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of
> Alejandro Molnar
> Sent: Thursday, February 01, 2007 12:23 PM
> To: [email protected]
> Subject: st: xtivreg2 and clustering
>
> Hi,
>
> I'm attempting to cluster standard errors at the level of
> panel units while including unit-time interactions among the
> regressors (using xtivrge2), and have run into the "number of
> clusters must be greater than instruments" problem. Using the
> -fwl- option has been suggested in the past (i.
> http://www.stata.com/statalist/archive/2006-03/msg00434.html
> ; ii. http://www.stata.com/statalist/archive/2006-11/msg00254.html)
>
> Both in my application and the example provided in the
> command's help, I get the result that the standard errors
> (for the coefficients I don't "partial out" through fwl) are
> the same whether I use the fwl option or not.
>
> I was expecting them to be different. I'm now thinking I
> should have expected them to be the same: since the fwl
> option estimates the same model (no new assumptions about
> errors, just a different order to the mechanics), why should
> the standard errors be different?
That's correct. The model is the same. The only reason the SEs might
differ is if you use a small sample correction (the -small- option) that
accounts for the number of regressors. -xtivreg2- doesn't count the
partialled-out ones.
> So my question is: Is what I've said above wrong and
> estimates should be different, or is the fwl option intended
> as housekeeping, to make sure I don't go interpreting
> standard errors I don't understand?
Housekeeping, but the main use is to help you get a VCV that is full
rank.
> Also, could someone please point me to articles about
> clustering in this case (e.g. showing why the VC isn't of
> full rank), since I'd like to gain some intuition about the problem.
Now *that's* a good question! I'd like to see a proper reference
myself. There has been some discussion on Statalist of this and related
topics, and Vince Wiggins gave a good explanation with respect to
singleton dummies a few years ago:
http://www.stata.com/statalist/archive/2003-06/msg00646.html
There is the very terse mention in Baum-Schaffer-Stillman (SJ 2003 3:1),
but we don't offer an intuitive explanation.
--Mark
>
> Thanks in advance,
> Alejandro
>
> *
> * For searches and help try:
> * http://www.stata.com/support/faqs/res/findit.html
> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
>
*
* For searches and help try:
* http://www.stata.com/support/faqs/res/findit.html
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/
