Dear All,
I am writing to ask an econometrics question. I am running a regression on paired observations
with some paired covariates (characteristics shared by the pair)
and individual-specific covariates (characteristics not shared).
The data looks like this:
(very similar to my previous posting on matching in case you happened to see it)
(GINI as my key independent variable)
With the unit of observation being a country pair, the econometrics model in my mind is:
DEPVARp = a + GINIp + DUMMYp + GINIp*DUMMYp + GDPp + POPp + errorp
(p stands for pairs)
But I do not know:
1) Is the model econometrically right?
2) how can I implement it in Stata?
Can it just be a normal OLS regression with a robust error clustered at paired level?
e.g. reg DEPVAR GINI DUMMY GINI_DUMMY GDP POP, cluster(PAIR ID)
OR, there is some special command for this particular econometrics model?
Intuitively, the paired regression should be quite different from the simple OLS at country level,
but I really do not know what the proper model should be.
The follow-up question is related to Instrumental Approach.
If I have valid instrumental variable for GINI, how can I implement it into the paired regression?
Is it the same as the usual procedure?
i.e. predict in the first stage and use the predict value for 2nd stage?
If there is anything that is unclear, I am very happy to clarify!
Thank you very much in advance for your kind help! I look forward to hearing from you!
Best regards
Long
I am writing to ask an econometrics question. I am running a regression on paired observations
with some paired covariates (characteristics shared by the pair)
and individual-specific covariates (characteristics not shared).
The data looks like this:
(very similar to my previous posting on matching in case you happened to see it)
| Pair ID | Country | GINI | Same Character Dummy | GDP | Pop | Dep. Var |
| 1 | USA | 0.2 | 1 | 100 | 100 | 5 |
| 1 | China | 0.5 | 1 | 80 | 500 | 6 |
| 2 | USA | 0.2 | 0 | 100 | 100 | 3 |
| 2 | Russia | 0.3 | 0 | 60 | 200 | 2 |
| 3 | China | 0.5 | 0 | 80 | 500 | 5 |
| 3 | India | 0.5 | 0 | 50 | 300 | 2 |
| ... |
With the unit of observation being a country pair, the econometrics model in my mind is:
DEPVARp = a + GINIp + DUMMYp + GINIp*DUMMYp + GDPp + POPp + errorp
(p stands for pairs)
But I do not know:
1) Is the model econometrically right?
2) how can I implement it in Stata?
Can it just be a normal OLS regression with a robust error clustered at paired level?
e.g. reg DEPVAR GINI DUMMY GINI_DUMMY GDP POP, cluster(PAIR ID)
OR, there is some special command for this particular econometrics model?
Intuitively, the paired regression should be quite different from the simple OLS at country level,
but I really do not know what the proper model should be.
The follow-up question is related to Instrumental Approach.
If I have valid instrumental variable for GINI, how can I implement it into the paired regression?
Is it the same as the usual procedure?
i.e. predict in the first stage and use the predict value for 2nd stage?
If there is anything that is unclear, I am very happy to clarify!
Thank you very much in advance for your kind help! I look forward to hearing from you!
Best regards
Long