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Re: st: inconsistent results for two-dimensions fixed effects regressions using xtreg reg areg ivreg2
From
Michael Barker <[email protected]>
To
[email protected]
Subject
Re: st: inconsistent results for two-dimensions fixed effects regressions using xtreg reg areg ivreg2
Date
Wed, 14 Aug 2013 09:29:12 -0400
Hi Nahla,
You are actually running several different models there. I'll describe
each one below, so you can see how they differ:
> 1) xi: reg DV IV i.year, vce (cluster industry)
- Year fixed effects only.
- Include one dummy variable for each year:
> 2) xtset firm year then xtreg DV IV i.year, fe vce (cluster industry)
- Year and firm fixed effects
- Equivalent to including one dummy for each year and one dummy for each firm.
- xtreg includes fixed effects for the panel variable, firm and you
include year dummies manually
> 3) egen industry_firm= group (industry firm) then xtset industry_firm year then xtreg DV IV i.year, fe vce (cluster industry)
- year and industry-firm level fixed effects
- equivalent to including one dummy for each year and one dummy for
each industry-firm combination
- apparently no firm is in multiple industries, so this regression is
equivalent to regression 2.
> 4) tsset industry_firm year then ivreg2 DV IV,cluster ( industry_firm year)
- No fixed effects
- You didn't specify the endogenous / IV variables, so this is just a
regular regression with clustered standard errors
- This is equivalent to "reg DV IV,cluster ( industry_firm year)"
> 5) areg DV IV, absorb ( year ) cluster (industry)
- Year fixed effects only
- Equivalent to regression 1, without reporting year coefficients
- Notice that the coefficient and standard error estimates are the
same as the first regression.
>
If you want firm and year fixed effects, I would use regression 2. If
you want to see equivalent results with alternative regressions, try
these:
xi: reg DV IV i.year i.firm, vce (cluster industry)
areg DV IV i.year, absorb (firm) cluster (industry)
The first suggestion might not run, since you will have to include
many dummy variables for all of your firms. You may exceed the maximum
number of variables allowed, depending on your version of Stata.
Mike
On Wed, Aug 14, 2013 at 8:22 AM, Nahla Betelmal <[email protected]> wrote:
> Hi Statalist,
>
> I have a panel data of firms and years, however, I would like to
> perform industry and year fixed effect regression. using different
> approaches, I got different IV coefficient and standard error,
> although it should be identical if I am doing it right. I would highly
> appreciate it if someone kindly explain what I am doing wrong and what
> is the right way to get industry and year fixed effects.
>
> the commands I used are:
>
> 1) xi: reg DV IV i.year, vce (cluster industry)
>
> 2) xtset firm year then xtreg DV IV i.year, fe vce (cluster industry)
>
> 3) egen industry_firm= group (industry firm) then xtset industry_firm
> year then xtreg DV IV i.year, fe vce (cluster industry)
>
> 4) tsset industry_firm year then ivreg2 DV IV,cluster ( industry_firm year)
>
> 5) areg DV IV, absorb ( year ) cluster (industry)
>
>
> under reg command: IV = 0.386 with SE= 0.022
> under xtreg command with firm year panel set: IV = .418 with SE= .0241
> under xtreg command with industry-firm year panel set: IV = .418 with SE= .024
> under ivreg2 command: IV = .410 with SE= .007
> under areg command: IV = 0.386 with SE= 0.022
>
>
> . xi: reg DV IV i.year, vce (cluster industry)
> i.year _Iyear_1992-2012 (naturally coded; _Iyear_1992 omitted)
>
> Linear regression Number of obs = 23830
> F( 21, 57) = 768.66
> Prob > F = 0.0000
> R-squared = 0.5461
> Root MSE = .6461
>
> (Std. Err. adjusted for 58 clusters in industry)
> -------------------------------------------------------------------------------
> | Robust
> DV | Coef. Std. Err. t P>|t| [95%
> Conf. Interval]
> --------------+----------------------------------------------------------------
> IV | .3869693 .0225831 17.14 0.000
> .3417475 .4321911
> _Iyear_1993 | .150389 .0239546 6.28 0.000 .1024208 .1983573
> _Iyear_1994 | .2857099 .0271864 10.51 0.000 .2312702 .3401496
> _Iyear_1995 | .2927993 .0307951 9.51 0.000 .2311331 .3544654
> _Iyear_1996 | .4353512 .0304859 14.28 0.000 .3743044 .4963981
> _Iyear_1997 | .5286896 .0292151 18.10 0.000 .4701874 .5871917
> _Iyear_1998 | .5852497 .0337522 17.34 0.000 .5176621 .6528374
> _Iyear_1999 | .6969439 .0523892 13.30 0.000 .5920364 .8018514
> _Iyear_2000 | .8019949 .0666928 12.03 0.000 .6684448 .9355449
> _Iyear_2001 | .7710818 .0486744 15.84 0.000 .673613 .8685507
> _Iyear_2002 | .6978223 .0325914 21.41 0.000 .6325592 .7630854
> _Iyear_2003 | .6427671 .0347611 18.49 0.000 .5731593 .712375
> _Iyear_2004 | .7757021 .0394535 19.66 0.000 .6966978 .8547064
> _Iyear_2005 | .7806429 .0418054 18.67 0.000 .6969291 .8643566
> _Iyear_2006 | .7746051 .0462916 16.73 0.000 .6819076 .8673025
> _Iyear_2007 | .7758041 .0484202 16.02 0.000 .6788444 .8727639
> _Iyear_2008 | .7734638 .0508533 15.21 0.000 .6716317 .8752958
> _Iyear_2009 | .7319797 .0564072 12.98 0.000 .6190263 .8449332
> _Iyear_2010 | .8741285 .0506573 17.26 0.000 .772689 .975568
> _Iyear_2011 | .8889354 .0532101 16.71 0.000 .782384 .9954869
> _Iyear_2012 | .8979328 .0565989 15.86 0.000 .7845956 1.01127
> _cons | 5.403047 .1238831 43.61 0.000 5.154975 5.651118
> -------------------------------------------------------------------------------
>
>
>
>
> xtset firm year
> panel variable: firm (unbalanced)
> time variable: year, 1992 to 2012, but with gaps
> delta: 1 unit
>
> . xtreg DV IV i.year, fe vce (cluster industry)
>
> Fixed-effects (within) regression Number of obs = 23830
> Group variable: firm Number of groups = 2312
>
> R-sq: within = 0.4113 Obs per group: min = 1
> between = 0.5998 avg = 10.3
> overall = 0.5456 max = 21
>
> F(21,57) = 463.93
> corr(u_i, Xb) = -0.0970 Prob > F = 0.0000
>
> (Std. Err. adjusted for 58 clusters in industry)
> ------------------------------------------------------------------------------
> | Robust
> DV | Coef. Std. Err. t P>|t| [95% Conf. Interval]
> -------------+----------------------------------------------------------------
> IV | .4183645 .0241281 17.34 0.000 .3700488
> .4666802
> |
> year |
> 1993 | .1560772 .0200202 7.80 0.000 .1159874 .196167
> 1994 | .2929982 .0224807 13.03 0.000 .2479813 .3380151
> 1995 | .3019359 .0268163 11.26 0.000 .2482373 .3556345
> 1996 | .4272691 .0264501 16.15 0.000 .3743038 .4802344
> 1997 | .5209287 .0266063 19.58 0.000 .4676506 .5742069
> 1998 | .5877827 .0276877 21.23 0.000 .5323391 .6432264
> 1999 | .6989115 .0427304 16.36 0.000 .6133453 .7844777
> 2000 | .7988406 .0477286 16.74 0.000 .7032657 .8944154
> 2001 | .7589164 .0375573 20.21 0.000 .6837091 .8341236
> 2002 | .687617 .034973 19.66 0.000 .6175848 .7576492
> 2003 | .6310008 .0488884 12.91 0.000 .5331035 .7288982
> 2004 | .7611996 .0507837 14.99 0.000 .659507 .8628921
> 2005 | .7687923 .0552525 13.91 0.000 .6581511 .8794336
> 2006 | .7524079 .0609127 12.35 0.000 .6304324 .8743834
> 2007 | .7519399 .0642041 11.71 0.000 .6233734 .8805064
> 2008 | .750493 .0684401 10.97 0.000 .6134441 .887542
> 2009 | .7118027 .067056 10.62 0.000 .5775254 .8460799
> 2010 | .8504969 .0632919 13.44 0.000 .7237569 .9772368
> 2011 | .8674839 .0664437 13.06 0.000 .7344328 1.000535
> 2012 | .863437 .0733127 11.78 0.000 .7166308 1.010243
> |
> _cons | 5.18669 .152373 34.04 0.000 4.881568 5.491812
> -------------+----------------------------------------------------------------
> sigma_u | .4935113
> sigma_e | .47151369
> rho | .52278302 (fraction of variance due to u_i)
> ------------------------------------------------------------------------------
>
>
> . egen industry_firm= group (industry firm)
>
> . xtset industry_firm year
> panel variable: industry_firm (unbalanced)
> time variable: year, 1992 to 2012, but with gaps
> delta: 1 unit
>
>
>
>
>
> . xtreg DV IV i.year, fe vce (cluster industry)
>
> Fixed-effects (within) regression Number of obs = 23830
> Group variable: industry_firm Number of groups = 2312
>
> R-sq: within = 0.4113 Obs per group: min = 1
> between = 0.5998 avg = 10.3
> overall = 0.5456 max = 21
>
> F(21,57) = 463.93
> corr(u_i, Xb) = -0.0970 Prob > F = 0.0000
>
> (Std. Err. adjusted for 58 clusters in industry)
> ------------------------------------------------------------------------------
> | Robust
> DV | Coef. Std. Err. t P>|t| [95% Conf. Interval]
> -------------+----------------------------------------------------------------
> IV | .4183645 .0241281 17.34 0.000 .3700488 .4666802
> |
> year |
> 1993 | .1560772 .0200202 7.80 0.000 .1159874 .196167
> 1994 | .2929982 .0224807 13.03 0.000 .2479813 .3380151
> 1995 | .3019359 .0268163 11.26 0.000 .2482373 .3556345
> 1996 | .4272691 .0264501 16.15 0.000 .3743038 .4802344
> 1997 | .5209287 .0266063 19.58 0.000 .4676506 .5742069
> 1998 | .5877827 .0276877 21.23 0.000 .5323391 .6432264
> 1999 | .6989115 .0427304 16.36 0.000 .6133453 .7844777
> 2000 | .7988406 .0477286 16.74 0.000 .7032657 .8944154
> 2001 | .7589164 .0375573 20.21 0.000 .6837091 .8341236
> 2002 | .687617 .034973 19.66 0.000 .6175848 .7576492
> 2003 | .6310008 .0488884 12.91 0.000 .5331035 .7288982
> 2004 | .7611996 .0507837 14.99 0.000 .659507 .8628921
> 2005 | .7687923 .0552525 13.91 0.000 .6581511 .8794336
> 2006 | .7524079 .0609127 12.35 0.000 .6304324 .8743834
> 2007 | .7519399 .0642041 11.71 0.000 .6233734 .8805064
> 2008 | .750493 .0684401 10.97 0.000 .6134441 .887542
> 2009 | .7118027 .067056 10.62 0.000 .5775254 .8460799
> 2010 | .8504969 .0632919 13.44 0.000 .7237569 .9772368
> 2011 | .8674839 .0664437 13.06 0.000 .7344328 1.000535
> 2012 | .863437 .0733127 11.78 0.000 .7166308 1.010243
> |
> _cons | 5.18669 .152373 34.04 0.000 4.881568 5.491812
> -------------+----------------------------------------------------------------
> sigma_u | .4935113
> sigma_e | .47151369
> rho | .52278302 (fraction of variance due to u_i)
> ------------------------------------------------------------------------------
>
>
>
> ivreg2 DV IV,cluster ( industry_firm year)
>
> OLS estimation
> --------------
>
> Estimates efficient for homoskedasticity only
> Statistics robust to heteroskedasticity and clustering on
> industry_firm and fyear2
>
> Number of clusters (industry_firm) = 2312 Number of obs = 23830
> Number of clusters (fyear2) = 21 F( 1, 20) = 2849.29
> Prob > F = 0.0000
> Total (centered) SS = 21896.66904 Centered R2 = 0.4955
> Total (uncentered) SS = 1891568.745 Uncentered R2 = 0.9942
> Residual SS = 11046.6797 Root MSE = .6809
>
> ------------------------------------------------------------------------------
> | Robust
> DV | Coef. Std. Err. z P>|z| [95% Conf. Interval]
> -------------+----------------------------------------------------------------
> IV | .410624 .0075071 54.70 0.000 .3959104 .4253377
> _cons | 5.883496 .0562149 104.66 0.000 5.773317 5.993675
> ------------------------------------------------------------------------------
> Included instruments: IV
>
>
>
>
> areg DV IV, absorb ( year ) cluster (industry)
>
> Linear regression, absorbing indicators Number of obs = 23830
> F( 1, 57) = 293.62
> Prob > F = 0.0000
> R-squared = 0.5461
> Adj R-squared = 0.5457
> Root MSE = 0.6461
>
> (Std. Err. adjusted for 58 clusters in twodigit)
> ------------------------------------------------------------------------------
> | Robust
> DV | Coef. Std. Err. t P>|t| [95% Conf. Interval]
> -------------+----------------------------------------------------------------
> IV | .3869693 .0225831 17.14 0.000 .3417475 .4321911
> _cons | 6.05483 .1337655 45.26 0.000 5.786969 6.322691
> -------------+----------------------------------------------------------------
> year | absorbed (21 categories)
>
>
>
> Many thanks in advance,
>
> Nahla Betelmal
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