Re: st: IV regression with panel data: random effects, clustered s.e.'s, postestimation tests

[Jana von Stein <janavs@umich.edu>]

Dear Austin,

Ah, I see. That makes good sense. Is there a good stats source you  
might point me to on this? This is sort of new territory for me and I  
want to make sure I understand the statistics/theory behind what  
choices I'm making. (I.e., on the u_i in particular and that [a] not  
okay to to xt R.E. in the presence of non-orthogonal u_i; and [b] that  
it is kosher(ish) to ignore panel structure and use R.E. ivreg?

Does the same apply to between effects?

Thanks,
Jana
On Apr 27, 2012, at 10:25 AM, Austin Nichols wrote:

> Jana von Stein <JANAVS@umich.edu>:
> For RE to be consistent, the effects u_i must be orthogonal to all
> predictors, so you can ignore the u_i and estimate a pooled model.
> I.e. use -ivreg2- (ignoring panel structure except for clustering on
> country and/or year to account for correlated errors) and sacrifice a
> little efficiency in favor of robustness against implausible
> assumptions.
>
> On Fri, Apr 27, 2012 at 9:21 AM, Jana von Stein <JANAVS@umich.edu>  
> wrote:
> > Hello,
> >
> > I have time-series panel (country) data and an endogenous independent
> > variable. My sense is that the best way to handle this is to  
> > instrument, use
> > a random effects model, and cluster on country. Does anyone know what
> > command(s) I can use that will do (1) clustered s.e.'s and (2)
> > postestimation tests (underidentification, Sargan, etc.) for  
> > instrument
> > validity and identification?
> >
> > Xtivreg2 is great, but -- unless I'm missing some extra code  
> > someone's
> > programmed -- isn't available for random or between effects. Fixed  
> > effects
> > (available in xtivreg2) are out of the question, as some of my  
> > instruments
> > don't vary over time within country.
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