st: XTOVERID after XTHTAYLOR Warning - endogenous variable(s) collinear with instruments, 3200 conformability error, and other errors

["M.M. Kramer" <M.M.Kramer@rug.nl>]

Dear Statalist users,

After using xtoverid I receive the following 4 warnings: (1) "endogenous 
variable(s) collinear with instruments" ; (2) "*:  3200 conformability 
error"; (3) "s_egmm(): - function returned error", and (4) "<istmt>:  -  
function returned error".
I use xtoverid to access the quality of the instruments after estimating 
an unbalanced panel using the xthtaylor command. In my estimations I 
also use time-dummies. For each individual in my data set I have a 
maximum of 52 monthly observations, so I included 51 time dummies to 
absorb aggregate time effects.
From an earlier discussion with Mark Schaffer I understood that when 
running xthtaylor with an unbalanced panel, 3 instruments (a mean, a 
demeaned and a GLS transformation) are created from the time-varying 
exogenous variables. In an unbalanced panel the GLS transformation is 
added to the estimation as another endogenous variable.  Given that time 
dummies are also time-varying and exogenous, they will be transformed 
and used as instruments. The warnings I receive very likely have to do 
with these GLS transformed time dummies that are added as endogenous 
variables. When limiting my estimation to a balanced panel, only the 1st 
error message ("Warning - endogenous variable(s) collinear with 
instruments") remains, but xtoverid provides me with useful output.. 
When removing the time dummies and using my whole unbalanced panel all 
error messages disappear, except that after all the output Stata returns 
(" xtoverid error: internal reestimation of eqn differs from original"), 
but I ignored this so far.
My question is, what can I do? I want to include the time-dummies and 
use all my data (for most individuals I do not have 52 monthly 
observations, so my data set would be severely reduced when using only 
the balanced data set). Another issue is that it feels a little awkward 
to use time dummies as instruments, as they do not have any cross 
sectional variation, but that's what xthtaylor does.
Thanks for your help.
Marc


--
Marc Kramer
University of Groningen
Faculty of Economics & Business
Department of Economics, Econometrics and Finance
Room WSN 860
P.O. Box 800
9700 AV Groningen
Tel.: 050-363.4532 / 3685

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