Wednesday, March 01, 2006

Re: st: fixed effects with clustering when the number of levels of variable to be absorbed exceeds number of clusters

Sorry - I made a mistake in the subject line of my last message. It is now correct. Daniel

At 09:59 AM 3/1/2006 -0500, you wrote: >Hi Austin - thanks for pointing out that "the number of levels of the >absorb() variable should not exceed the number of clusters." I have two >questions about this: (1) I assume that the same holds true for xtreg,fe >with clustering (given that this yields identical std errors to areg with >clustering). Is this assumption correct? (2) Does anyone have suggestions >for the most efficient way to estimate fixed-effects models with >clustering when there are thousands of fixed effects but clustering occurs >on a variable with many fewer units? For example, if I have a panel >dataset tracking thousands of individuals over time and I want to examine >the impact of a state policy variable, then I would want to estimate a >model with individual fixed effects but I would also want to cluster by state. >What would be a sensible way to proceed in this situation? > >Thanks. Daniel > >At 02:06 PM 2/28/2006 -0500, you wrote: >>Perhaps I should ignore this question in the same way you have ignored >>the advice in the Statalist FAQ on how to write a well-formed question >>(in particular, you give no indication what command you used or what >>error message you got, much less show us the output), but you should >>certainly read: >> -help xtreg- -help xtdata- and -help areg- >>for starters. Note also that you may want to cluster on id, assuming >>your fixed effects are individual id and year effects, to allow for >>arbitrary serial correlation within panel, and -cluster- implies >>-robust-. But see the various FAQs on the subject, and such advice as >>appears in the relevant help files, e.g. >> Note: Exercise caution when using the cluster() option with areg. >> The effective number of degrees of freedom for the robust variance >> estimator is (n_g - 1), where n_g is the number of clusters. Thus >> the number of levels of the absorb() variable should not exceed the >> number of clusters. >> >>On 2/28/06, Yasmine Kent <yasmine_kent@yahoo.co.uk> wrote: >> > Hi, >> > >> > Apologies if this is a basic question... >> > >> > I would like to obtain ROBUST standard errors and >> > t-statistics in a panel data regression that I am >> > running (with 2-way fixed effects). The 'robust' >> > command does not appear to work with panel data, it >> > gives an error message. Theoretically, I thought that >> > it should be possible to get these. Is there another >> > command I should use instead? (I am using Stata 8). >> > >> > Thank you! >> > Yasmine >> >>* >>* For searches and help try: >>* http://www.stata.com/support/faqs/res/findit.html >>* http://www.stata.com/support/statalist/faq >>* http://www.ats.ucla.edu/stat/stata/ > >Daniel Simon >Assistant Professor >Department of Applied Economics and Management >Cornell University >(607) 255-1626 >* >* For searches and help try: >* http://www.stata.com/support/faqs/res/findit.html >* http://www.stata.com/support/statalist/faq >* http://www.ats.ucla.edu/stat/stata/

Daniel Simon Assistant Professor Department of Applied Economics and Management Cornell University (607) 255-1626

* * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/


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