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  • varying endogenous variable while constant instrument variable

    Dear Statalist members,
    I have a penal data crop plot level profit every season. i want to calculate xtreg results using below command
    xtreg ln_m_net_profit_ac ln_operational_land ln_m_labor_hrs_ac ln_m_capital_val_ac i.plot_location i.Year , fe
    but here log of operational land of the household ( ln_operational_land) is an endogenous variable . hence to tackle endogeneity, i used average operational land for previous generation for each household as instrumental variable.
    This data is collected for 2009-2014 at plot level and operational land is a household level variable. operational land may vary each year during 2009-2014 but average operational land for previous generation as instrumental variable (ln_operational_land_ivs) does not vary.

    I used 2sls xtivreg results to first and second stage results but I got error after using below command

    xi:xtivreg2 ln_m_net_profit_ac ln_m_labor_hrs_ac ln_m_capital_val_ac i.plot_location i.Year (ln_operational_land = ln_operational_land_ivs), fe cluster (plot_ids time_ids )

    Error: Warning - singleton groups detected. 69 observation(s) not used.
    Warning - collinearities detected
    Vars dropped: ln_operational_land_ivs
    equation not identified; must have at least as many instruments not in
    the regression as there are instrumented variables
    Please help me to understand the problem. I have attached sample dataset
    Thanks


    Code:
    * Example generated by -dataex-. To install: ssc install dataex
    clear
    input long(plot_ids time_ids) float(ln_m_net_profit_ac ln_MAIN_PLOT_AREA ln_operational_land ln_operational_land_ivs ln_m_labor_hrs_ac ln_m_capital_val_ac Year) long plot_location
    2112  2         .  .6931472  .6931472  .9707789  6.824374  8.992185 2009 1
    2112  4  9.165203  .6931472  .6931472  .9707789  6.333871  8.673855 2009 1
    2112 17  8.633103  .6931472  .6931472  .9707789  6.052089  8.814665 2012 1
    2113  2         . 1.0986123 1.0986123  1.867176  5.644269  8.961107 2009 1
    2113  7  9.307477 1.0986123 1.0986123  1.867176  6.122493   8.58703 2010 1
    2113 12         . 1.0986123 1.0986123  1.867176  5.991465  9.283408 2011 1
    2113 17    9.2536 1.0986123 1.0986123  1.867176  6.118097   9.25057 2012 1
    2113 22  9.862342 1.0986123 1.0986123  1.867176  5.821072  9.097601 2013 1
    2113 27         . 1.0986123 1.0986123  1.867176  5.155217  8.881327 2014 1
    2143  4         . -.6931472         0  .3220835 4.3307333  6.745236 2009 1
    2143 22  9.640028 -.6931472 1.0986123  .3220835  6.605298  9.434621 2013 1
    2144  4         . -.6931472         0  .3220835 4.3307333  6.745236 2009 1
    2144 22  9.476099  .9162908 1.0986123  .3220835  5.304962  8.797382 2013 1
    2144 27         .  .9162908 1.0986123  .3220835  5.002603  8.560498 2014 1
    2148  2         . 1.0986123  1.609438 1.7509375 4.3985558  5.922472 2009 1
    2149  2  7.488321         0  1.609438 1.7509375  6.461468  8.414706 2009 1
    2150  2         .         0  1.609438 1.7509375  6.590301 8.7045355 2009 1
    2150  4  8.637284         0  1.609438 1.7509375  6.539586  8.257904 2009 1
    2176  2         .  .6931472  .6931472  1.901361  6.190315  8.603454 2009 1
    2176  7  9.017366  .6931472  .6931472  1.901361   6.57368  8.859924 2010 1
    2177 12  8.107305  .6931472  .6931472  1.901361  6.030685  8.780664 2011 1
    2177 17  9.339705  .6931472  .6931472  1.901361  6.090178  9.088822 2012 1
    2178  7         .  .9162908 2.0794415 1.1143216  4.644391  6.626718 2010 1
    2179 17  8.725184  1.252763  1.704748 1.1143216  5.793014  8.893298 2012 1
    2179 22  7.543363  1.252763  1.704748 1.1143216  5.554509  9.098202 2013 1
    2180  2         .  1.252763 2.2823825 1.1143216  5.477857  7.666292 2009 1
    2180  4         .  1.252763 2.2823825 1.1143216  6.498282  8.619027 2009 1
    2180  7         .  1.252763 2.0794415 1.1143216  6.193589    8.4487 2010 1
    2180  9  7.604895  1.252763 2.0794415 1.1143216  6.133398  8.934192 2010 1
    2180 12         .  1.252763 1.8405497 1.1143216  5.676754  8.795161 2011 1
    2180 14         .  1.252763 1.8405497 1.1143216  5.437288  8.266025 2011 1
    2181  2         .  .6931472 2.2823825 1.1143216   5.40139  7.590217 2009 1
    2181  4 10.393232  .6931472 2.2823825 1.1143216  7.352441  9.078179 2009 1
    2181  7 10.831265  .6931472 2.0794415 1.1143216  6.861362  8.091015 2010 1
    2181 17  8.918162  .6931472  1.704748 1.1143216  5.836758  8.934982 2012 1
    2181 22  8.132054  .6931472  1.704748 1.1143216   5.47227 8.9593115 2013 1
    2181 27         .  .6931472  1.704748 1.1143216 3.5115454  8.274931 2014 1
    2182  4  6.610397  .5877866 2.2823825 1.1143216  4.627149  5.196039 2009 1
    2182 12         .  .5877866 1.8405497 1.1143216  6.086775   8.58119 2011 1
    2183 12  8.017653         0 1.8405497 1.1143216  6.198479  8.568143 2011 1
    2186  4  5.560682 1.3862944  2.484907  2.018231   4.85203  7.090077 2009 1
    2186 12         . 1.3862944  2.484907  2.018231 4.7361984  7.914778 2011 1
    2186 17  8.849896 1.3862944  2.484907  2.018231  6.049734 8.9028635 2012 1
    2186 22  9.989823 1.3862944  2.484907  2.018231  6.014937  8.916976 2013 1
    2186 27         . 1.3862944 1.3862944  2.018231  5.062595   8.46985 2014 1
    2187  2         . 2.0794415  2.484907  2.018231  5.743003  8.852186 2009 1
    2187  4  9.410327 2.0794415  2.484907  2.018231  6.360727 8.4524765 2009 1
    2187  7  8.574793 2.0794415 2.0794415  2.018231  5.868783   8.09809 2010 1
    2187  9 8.9774475 2.0794415 2.0794415  2.018231  6.269096  8.397959 2010 1
    2187 12  8.775703 2.0794415  2.484907  2.018231  5.898527  7.739577 2011 1
    2187 14  7.174957 2.0794415  2.484907  2.018231   5.83909  8.183714 2011 1
    2187 17  8.070884 2.0794415  2.484907  2.018231  5.853023   8.99886 2012 1
    2187 19         . 2.0794415  2.484907  2.018231  6.359574  9.072686 2012 1
    2187 22  9.726792 2.0794415  2.484907  2.018231  5.849103  8.953013 2013 1
    2187 24  8.433899 2.0794415  2.484907  2.018231  6.466145  9.619771 2013 1
    2196 27         .         0   1.94591 2.1036463  5.659482  8.633037 2014 1
    2197  2         .  1.609438   1.94591 2.1036463  5.181784   8.21059 2009 2
    2197  7  9.336774  1.609438   1.94591 2.1036463  6.182085  8.575462 2010 1
    2197 27         .  1.609438   1.94591 2.1036463  5.537334  8.672332 2014 1
    2220  2  8.470752  1.609438  2.420368 2.5103216  5.713733  7.177324 2009 1
    2220  4  9.592049  1.609438  2.420368 2.5103216  6.415915  8.201454 2009 1
    2220  9  7.796151  1.609438  1.609438 2.5103216  6.350304  8.271293 2010 1
    2220 12         .  1.609438  2.420368 2.5103216 4.6051702  7.200425 2011 1
    2220 22  9.706996  1.609438 2.7568405 2.5103216  5.795044  8.801607 2013 1
    2221  2  7.734209 1.8325815  2.420368 2.5103216  5.468977  7.614381 2009 1
    2221 12         . 1.8325815  2.420368 2.5103216  5.416841  8.159472 2011 1
    2221 17   8.79839 1.8325815  2.420368 2.5103216   6.21912  9.210549 2012 1
    2221 22  9.289739 1.8325815 2.7568405 2.5103216   6.03966  8.988478 2013 1
    2221 27  8.189953 1.8325815 2.8763855 2.5103216  5.537334  8.947205 2014 1
    2222 22  8.180321  .9162908 2.7568405 2.5103216  5.605802  6.709304 2013 1
    2222 27  9.183585  .9162908 2.8763855 2.5103216   5.56987  8.946896 2014 1
    2223 22 10.647625  .6931472 2.7568405 2.5103216  5.700444  8.705746 2013 1
    2232  2  7.539551  2.014903 2.6390574 2.6436894  5.962194  8.439681 2009 1
    2232  4  8.511879  2.014903 2.6390574 2.6436894  5.951944  8.309061 2009 1
    2232  7  9.321845  2.014903 2.2512918 2.6436894  6.291569   8.80119 2010 1
    2232  9  6.959715  2.014903 2.2512918 2.6436894  6.335054  8.950706 2010 1
    2232 12  8.804358  2.014903 2.2512918 2.6436894  6.158607  8.713908 2011 1
    2232 14  7.863899  2.014903 2.2512918 2.6436894  6.095825  8.747316 2011 1
    2232 17  9.284389  2.014903 2.2512918 2.6436894  6.448889  9.476438 2012 1
    2232 19  8.489822  2.014903 2.2512918 2.6436894  6.120297  8.997766 2012 1
    2232 22  9.843921  2.014903 2.2512918 2.6436894  6.018032  8.903611 2013 1
    2232 24  9.204134  2.014903 2.2512918 2.6436894  6.304449  9.110726 2013 1
    2232 27         .  2.014903 2.2512918 2.6436894  5.889801 9.3877945 2014 1
    2232 29  9.425344  2.014903 2.2512918 2.6436894  6.032287  8.763741 2014 1
    2233  2  7.549741  .6931472 2.6390574 2.6436894  5.971262  8.259549 2009 1
    2233  7  8.416721  .6931472 2.2512918 2.6436894  6.156979  8.387256 2010 1
    2233 12         .  .6931472 2.2512918 2.6436894  5.828946 8.4247265 2011 1
    2233 17  9.531973  .6931472 2.2512918 2.6436894  6.156979  8.862271 2012 1
    2233 22  9.430882  .6931472 2.2512918 2.6436894  6.045005  9.281754 2013 1
    2233 27         .  .6931472 2.2512918 2.6436894  5.560682  9.020813 2014 1
    2234  2  5.665431 1.5040774 2.6390574 2.6436894  5.710427  8.157109 2009 1
    2244  7   9.65037  .6931472  1.252763  2.339881   6.38097  8.750279 2010 1
    2244 12         .  .6931472  1.252763  2.339881  5.749393  8.739108 2011 1
    2244 17  8.606994  .6931472  1.252763  2.339881  6.182085  9.033782 2012 1
    2244 22  9.438463  .6931472  1.252763  2.339881  5.950643  9.223316 2013 1
    2244 27         .  .6931472  1.252763  2.339881   5.31812  8.504107 2014 1
    2277  2  7.687607 2.0794415 2.1972246  2.249975  5.935952  8.641983 2009 1
    2277  4  8.820045 2.0794415 2.1972246  2.249975  6.088073  8.762981 2009 1
    2277  7  8.638821 2.0794415 2.1972246  2.249975  6.156555  8.827261 2010 1
    2277  9  9.458324 2.0794415 2.1972246  2.249975  6.284134  8.616314 2010 1
    end
    label values plot_ids plot_ids
    label def plot_ids 2112 "INAPAUR110010000AOwn land", modify
    label def plot_ids 2113 "INAPAUR130030000AOwn land", modify
    label def plot_ids 2143 "INAPAUR134034000AOwn land", modify
    label def plot_ids 2144 "INAPAUR134034000BLeased-in on fixed rent", modify
    label def plot_ids 2148 "INAPAUR135035000AOwn land", modify
    label def plot_ids 2149 "INAPAUR135035000BOwn land", modify
    label def plot_ids 2150 "INAPAUR135035000CLeased-in on fixed rent", modify
    label def plot_ids 2176 "INAPAUR143043000AOwn land", modify
    label def plot_ids 2177 "INAPAUR143043000BLeased-in on fixed rent", modify
    label def plot_ids 2178 "INAPAUR144044000AOwn land", modify
    label def plot_ids 2179 "INAPAUR144044000BLeased-in on fixed rent", modify
    label def plot_ids 2180 "INAPAUR144044000BOwn land", modify
    label def plot_ids 2181 "INAPAUR144044000CLeased-in on fixed rent", modify
    label def plot_ids 2182 "INAPAUR144044000DLeased-in on fixed rent", modify
    label def plot_ids 2183 "INAPAUR144044000ELeased-in on fixed rent", modify
    label def plot_ids 2186 "INAPAUR146046000AOwn land", modify
    label def plot_ids 2187 "INAPAUR146046000BOwn land", modify
    label def plot_ids 2196 "INAPAUR148048000AOwn land", modify
    label def plot_ids 2197 "INAPAUR148048000COwn land", modify
    label def plot_ids 2220 "INAPAUR153053000AOwn land", modify
    label def plot_ids 2221 "INAPAUR153053000BOwn land", modify
    label def plot_ids 2222 "INAPAUR153053000COwn land", modify
    label def plot_ids 2223 "INAPAUR153053000DOwn land", modify
    label def plot_ids 2232 "INAPAUR155055000AOwn land", modify
    label def plot_ids 2233 "INAPAUR155055000BOwn land", modify
    label def plot_ids 2234 "INAPAUR155055000COwn land", modify
    label def plot_ids 2244 "INAPAUR181081000AOwn land", modify
    label def plot_ids 2277 "INAPAUR182082000AOwn land", modify
    label values time_ids time_ids
    label def time_ids 2 "2009Kharif", modify
    label def time_ids 4 "2009Rabi", modify
    label def time_ids 7 "2010Kharif", modify
    label def time_ids 9 "2010Rabi", modify
    label def time_ids 12 "2011Kharif", modify
    label def time_ids 14 "2011Rabi", modify
    label def time_ids 17 "2012Kharif", modify
    label def time_ids 19 "2012Rabi", modify
    label def time_ids 22 "2013Kharif", modify
    label def time_ids 24 "2013Rabi", modify
    label def time_ids 27 "2014Kharif", modify
    label def time_ids 29 "2014Rabi", modify
    label values plot_location plot_location
    label def plot_location 1 "Inside", modify
    label def plot_location 2 "Outside", modify

  • #2
    If the instrument does not vary, you are toast. You need within variation with fixed effects, so find some other time-varying instrument.

    Comment


    • #3
      why we can not use time invariant iv in fixed effect model? is there theoretical constraints or empirical constraints?

      Comment


      • #4
        If the variable does not vary within the fixed effect vectors you include, it becomes perfectly collinear with the latter. Stata drops them because they do not capture any additional variation, and it is impossible to calculate the variance of the estimator as it causes a division by 0.

        I would recommend you look into the endogeneity of the original regressor, and the causes for this endogeneity. Fixed effect regression are immune to omitted variable bias caused by time-invariant variables, so perhaps your original variable is not plausibly endogenous after all if it only correlates with a variable that does not vary with time.

        Comment

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