Dear members,
I am running the following regressions in STATA8.2:
CRit = a*Xit + b*Zit + (state by year fixed effects) + (county fixed effects), cluster(county)
CRit= crime rate in county i year t
Xit = endogenous regressor
Zit = set of 7 exogenous regressors
state by year fixed effects = interactions between indicators for each state and year
I instrument Xit using Wit
There are 246 counties, 10 states, 8 years
I have been running this model with two commands
xi: ivreg CRit (Xit=Wit) Zit (state by year fixed effects) i.county, cluster(county)
xtivreg2 CRit (Xit=Wit) Zit (state by year fixed effects) i.county, fe i.(county) cluster(county)
the two commands give exactly the same coefficient, and just slightly different std errors, but after xtivreg2 I get the following message:
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 noticed that 2 states have a number of counties (clusters) lower than the number of years available. By dropping these two states STATA run the xtivreg2 without giving the error message.
I have read the help file and FAQ and I think something is going with those state by year effects that creates a kind of singleton dummy problem, but I am not sure
Any help would be appreciated
thank you
sara
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