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

[Austin Nichols <austinnichols@gmail.com>]

Jana von Stein <janavs@umich.edu>:
The manual entry for -xtreg- provides a very good discussion, and the
References section provides much additional reading.

On Fri, Apr 27, 2012 at 10:44 AM, Jana von Stein <janavs@umich.edu> wrote:
> 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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