st: RE: xtoverid' command and 'sigma_u=0

["Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>]

Demetrios,

This comes up on Statalist from time to time, e.g.:

http://www.stata.com/statalist/archive/2002-12/msg00106.html

http://www.stata.com/statalist/archive/2011-08/msg01389.html

--Mark

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of D. 
> Demetriou
> Sent: 28 March 2012 16:57
> To: statalist@hsphsun2.harvard.edu
> Subject: st: xtoverid' command and 'sigma_u=0
> 
> Hi everyone,
>  
> I am basically trying to use the 'xtoverid' command after 
> performing an ' 
> xi: xtreg, re vce(cluster) ' regression on panel data.
>  
> The problem here is that sigma_u (and hence rho subsequently) 
> equals to zero (sigma_u = 0). Why might be I getting this?? 
> The interesting thing here is that when I add a 'time dummy' 
> (equals 1 for each period except the reference period) 
> sigma_u is no longer zero.
>  
> Sigma_u=0 disables the 'xtoverid' command which I need to 
> decide on FE Vs RE.
>  
> Here is the estimation table:
>  
>  
> Random-effects GLS regression Number of obs = 90 Group 
> variable: region Number of groups = 9
>  
> R-sq: within = 0.7575 Obs per group: min = 10
>        between = 0.4357 avg = 10.0
>        overall = 0.7426 max = 10
>  
>                                                 Wald chi2(5) 
> = 493.00 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000
>  
>                                  (Std. Err. adjusted for 9 clusters in
> region)
> --------------------------------------------------------------
> ----------------
>              | Robust publicprov1 | Coef. Std. Err. z P>|z| 
> [95% Conf. 
> Interval] 
> -------------+------------------------------------------------
> ----------
> -------------+------
>   hownership | -.0731302 .0143642 -5.09 0.000 -.1012835 -.0449769
>      incvars | -.1222154 .0138148 -8.85 0.000 -.1492918 -.095139
>   popabove60 | -.0387703 .0197494 -1.96 0.050 -.0774783 -.0000622
>          ILO | -.2344766 .0418934 -5.60 0.000 -.3165863 -.152367
>         wave | -.0623215 .0242992 -2.56 0.010 -.109947 -.0146959
>        _cons | 30.88966 1.00746 30.66 0.000 28.91508 32.86425 
> -------------+------------------------------------------------
> ----------
> -------------+------
>      sigma_u |          0
>      sigma_e |  .29067783
>          rho | 0 (fraction of variance due to u_i)
> --------------------------------------------------------------
> ----------------
> 
> *
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