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Re: st: RE: problem using xtivreg2 without instruments


From   Samia Tavares <[email protected]>
To   [email protected]
Subject   Re: st: RE: problem using xtivreg2 without instruments
Date   Sat, 14 Apr 2007 16:23:37 -0400

Mark,

I tried without the weight as you suggested, and the standard errors from xtreg were slightly higher than those with xtivreg2. In fact, I tried dropping one of the interaction variables, which eliminated the error message, and still the standard errors were different (xtreg slightly higher than xtivreg2). Any ideas what could be wrong?

Thanks for the help!

Samia

On Apr 14, 2007, at 1:16 PM, Schaffer, Mark E wrote:


Samia,

-----Original Message-----
From: [email protected]
[mailto:[email protected]] On Behalf Of
Samia Tavares
Sent: 14 April 2007 17:33
To: [email protected]
Subject: st: problem using xtivreg2 without instruments

Hi everyone,

I'm trying to estimate a fixed effects regression with
analytical weights. I understand that this is not possible
with xtreg (only if I were using random effects), so I am
using xtivreg2 instead, since the help file indicated that I
could use it without instruments to obtain the same results I
would get with xtreg. The equation I am estimating is of the form:

xi:xtivreg2 y dummy control i.year*continent1 i.year*continent2
i.year*continent3 i.year [aweight=variance^-1], fe cluster(country)

When I estimate this, I get the following:

Error: estimated covariance matrix of moment conditions not
of full rank;
        overidentification statistic not reported, and
standard errors and
        model tests should be interpreted with caution.
Possible causes:
        singleton dummy variable (dummy with one 1 and N-1 0s or vice
versa)
fwl option may address problem.

I read in the FAQs about this error, but in the context of
including instruments with xtivreg2. I have checked the
dataset and none of the dummy variables (dummy, continent,
continent2, continent3) contain a singleton. Obviously since
I have no instruments, I am not concerned about the
overidentification statistic, but I want to be sure about the
standard errors.

When I estimate the model without the year-continent
interactions, I don't get this error. However, I do wish to
include them to check for the robustness of my results.

Any help will be greatly appreciated!!
The error message is correct, I think. Most likely, all the
interactions mean that your var-cov matrix is not of full rank because
you have more regressors than clusters. Since you're not doing any
instrumenting or efficient GMM, this will probably cause you only minor
problems at most - you won't, for example, be able to test the joint
significance of more variables than clusters.

A useful cross-check would be to estimate using xtivreg2 without
weighting and using xtreg, both with cluster. The SEs should be the
same, but xtivreg2 will again warn you.

Cheers,
Mark


Samia



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