I have the following doubt, and would really appreciate any help.
I am trying to quantify the impact of FTAs on the bilateral stock of migrants between two countries. For this, I have constructed a database which includes the stocks of migrants in 5-year intervals from 1980 to 2010, matched with the FTAs that affect each country-combination and and several bilateral variables typical in the gravity setting (distance, commmon language, etc.). I have generated country-year FE (i.e. destination country-time and origin-country-time FE). Below you can see a selection of the variables in my dataset (the ones relevant in my estimations):
Code:
* Example generated by -dataex-. To install: ssc install dataex clear input float id int year double tot str14 destination str32 origin str7 ccode_origin str3 ccode_destination str91 agreement byte(contig comlang_off fta_wto) float(exp_time imp_time ln_gdp_diff_cap ln_pop_o ln_pop_d ln_distw ln_initial_stock eu wto_member) 1 1980 0 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 1 1 . . . . 0 . . 1 1985 0 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 2 2 . . . . 0 . . 1 1990 0 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 3 3 . . . . 0 . . 1 1995 3 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 4 4 . . . . 0 . . 1 2000 9 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 5 5 . . . . 0 . . 1 2005 9 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 6 6 . . . . 0 . . 1 2010 10 "Australia" "Andorra" "ADO" "AUS" "NONE" . . . 7 7 . . . . 0 . . 2 1980 0 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 8 1 3.607467 2.578733 2.687303 9.313451 0 0 0 2 1985 0 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 9 2 3.964179 2.4448636 2.757348 9.313451 0 0 0 2 1990 1559 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 10 3 . 2.4622514 2.8370354 9.313451 0 0 0 2 1995 3301 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 11 4 . 2.8671074 2.894364 9.313451 0 0 0 2 2000 6645 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 12 5 . 3.025066 2.952459 9.313451 0 0 0 2 2005 7242 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 13 6 4.902947 3.2132945 3.01528 9.313451 0 0 0 2 2010 7721 "Australia" "Afghanistan" "AFG" "AUS" "NONE" 0 0 0 14 7 4.52509 3.346312 3.092487 9.313451 0 0 0 3 1980 0 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 15 1 2.57005 2.0330234 2.687303 9.46923 0 0 0 3 1985 0 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 16 2 2.723525 2.2042716 2.757348 9.46923 0 0 0 3 1990 225 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 17 3 2.909733 2.3354244 2.8370354 9.46923 0 0 0 3 1995 261 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 18 4 3.890078 2.493615 2.894364 9.46923 0 0 1 3 2000 342 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 19 5 3.4979475 2.633681 2.952459 9.46923 0 0 1 3 2005 380 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 20 6 2.9917684 2.806046 3.01528 9.46923 0 0 1 3 2010 418 "Australia" "Angola" "AGO" "AUS" "NONE" 0 0 0 21 7 2.507893 2.9729304 3.092487 9.46923 0 0 1 4 1980 1230 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 22 1 2.8120255 .9828262 2.687303 9.629609 6.777647 0 0 4 1985 1027 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 23 2 2.847914 1.0867968 2.757348 9.629609 6.777647 0 0 4 1990 892 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 24 3 3.349706 1.1898359 2.8370354 9.629609 6.777647 0 0 4 1995 941 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 25 4 3.287482 1.159326 2.894364 9.629609 6.777647 0 0 4 2000 1170 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 26 5 2.898926 1.1278561 2.952459 9.629609 6.777647 0 1 4 2005 1234 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 27 6 2.496994 1.096184 3.01528 9.629609 6.777647 0 1 4 2010 1258 "Australia" "Albania" "ALB" "AUS" "NONE" 0 0 0 28 7 2.518265 1.0496577 3.092487 9.629609 6.777647 0 1 5 1980 4784 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 29 1 1.3143656 3.336486 2.687303 9.39637 7.79111 0 1 5 1985 5815 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 30 2 1.3672258 3.412481 2.757348 9.39637 7.79111 0 1 5 1990 7369 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 31 3 1.4363997 3.485075 2.8370354 9.39637 7.79111 0 1 5 1995 8079 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 32 4 .8195249 3.55057 2.894364 9.39637 7.79111 0 1 5 2000 9251 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 33 5 .8426481 3.608295 2.952459 9.39637 7.79111 0 1 5 2005 10320 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 34 6 1.7739726 3.654491 3.01528 9.39637 7.79111 0 1 5 2010 11330 "Australia" "Argentina" "ARG" "AUS" "NONE" 0 0 0 35 7 1.5085126 3.698192 3.092487 9.39637 7.79111 0 1 6 1980 198 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 36 1 . 1.1302072 2.687303 9.487109 4.6821313 0 0 6 1985 181 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 37 2 . 1.2057154 2.757348 9.487109 4.6821313 0 0 6 1990 736 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 38 3 3.3540676 1.265452 2.8370354 9.487109 4.6821313 0 0 6 1995 572 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 39 4 3.80003 1.1703663 2.894364 9.487109 4.6821313 0 0 6 2000 712 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 40 5 3.5515285 1.1236619 2.952459 9.487109 4.6821313 0 0 6 2005 798 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 41 6 3.040486 1.1035722 3.01528 9.487109 4.6821313 0 1 6 2010 882 "Australia" "Armenia" "ARM" "AUS" "NONE" 0 0 0 42 7 2.808043 1.0863696 3.092487 9.487109 4.6821313 0 1 7 1980 0 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 43 1 1.8728904 -2.654969 2.687303 9.718523 0 0 0 7 1985 0 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 44 2 1.3149847 -2.721987 2.757348 9.718523 0 0 0 7 1990 15 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 45 3 1.0580324 -2.782138 2.8370354 9.718523 0 0 1 7 1995 18 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 46 4 1.0354974 -2.683128 2.894364 9.718523 0 0 1 7 2000 17 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 47 5 .7637718 -2.5555694 2.952459 9.718523 0 0 1 7 2005 20 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 48 6 1.0346985 -2.4941695 3.01528 9.718523 0 0 1 7 2010 25 "Australia" "Antigua and Barbuda" "ATG" "AUS" "NONE" 0 1 0 49 7 1.381128 -2.4391725 3.092487 9.718523 0 0 1 8 1980 20622 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 57 1 -.06236241 2.0214725 2.687303 9.655565 9.328301 0 1 8 1985 20763 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 58 2 .2230513 2.0235302 2.757348 9.655565 9.328301 0 1 8 1990 20488 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 59 3 -.17144334 2.0383396 2.8370354 9.655565 9.328301 0 1 8 1995 18968 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 60 4 -.3958077 2.0729554 2.894364 9.655565 9.328301 0 1 8 2000 18403 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 61 5 -.12358955 2.0808864 2.952459 9.655565 9.328301 0 1 8 2005 19756 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 62 6 -.11767209 2.1075222 3.01528 9.655565 9.328301 0 1 8 2010 20808 "Australia" "Austria" "AUT" "AUS" "NONE" 0 0 0 63 7 .10915694 2.1270132 3.092487 9.655565 9.328301 0 1 9 1980 15 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 64 1 . 1.8187243 2.687303 9.462084 2.1972246 0 0 9 1985 15 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 65 2 . 1.8982354 2.757348 9.462084 2.1972246 0 0 9 1990 121 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 66 3 2.689629 1.9683703 2.8370354 9.462084 2.1972246 0 0 9 1995 50 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 67 4 3.937101 2.0392704 2.894364 9.462084 2.1972246 0 0 9 2000 118 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 68 5 3.4987595 2.085498 2.952459 9.462084 2.1972246 0 0 9 2005 133 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 69 6 3.0698476 2.1272612 3.01528 9.462084 2.1972246 0 0 9 2010 150 "Australia" "Azerbaijan" "AZE" "AUS" "NONE" 0 0 0 70 7 2.182197 2.2032433 3.092487 9.462084 2.1972246 0 0 10 1980 0 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 71 1 3.822308 1.4174387 2.687303 9.40385 0 0 1 10 1985 0 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 72 2 3.8602784 1.563217 2.757348 9.40385 0 0 1 10 1990 15 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 73 3 4.50232 1.723815 2.8370354 9.40385 0 0 1 10 1995 12 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 74 4 4.839501 1.8261485 2.894364 9.40385 0 0 1 10 2000 18 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 75 5 5.112754 1.8982623 2.952459 9.40385 0 0 1 10 2005 20 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 76 6 5.465685 2.0503206 3.01528 9.40385 0 0 1 10 2010 23 "Australia" "Burundi" "BDI" "AUS" "NONE" 0 0 0 77 7 5.463675 2.2227573 3.092487 9.40385 0 0 1 11 1980 3258 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 78 1 -.2370437 2.2884092 2.687303 9.700097 7.40062 0 1 11 1985 3654 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 79 2 .2638566 2.2883146 2.757348 9.700097 7.40062 0 1 11 1990 4016 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 80 3 -.12653029 2.2993176 2.8370354 9.700097 7.40062 0 1 11 1995 4009 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 81 4 -.3368965 2.3161736 2.894364 9.700097 7.40062 0 1 11 2000 4321 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 82 5 -.066290274 2.3273997 2.952459 9.700097 7.40062 0 1 11 2005 4810 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 83 6 -.08270735 2.3493366 3.01528 9.700097 7.40062 0 1 11 2010 5289 "Australia" "Belgium" "BEL" "AUS" "NONE" 0 0 0 84 7 .1551092 2.390621 3.092487 9.700097 7.40062 0 1 12 1980 0 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 85 1 3.294166 1.3131924 2.687303 9.630884 0 0 1 12 1985 0 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 86 2 3.847755 1.4556485 2.757348 9.630884 0 0 1 12 1990 0 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 87 3 3.839346 1.609692 2.8370354 9.630884 0 0 1 12 1995 0 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 88 4 4.0285916 1.7893662 2.894364 9.630884 0 0 1 12 2000 16 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 89 5 4.156149 1.9386505 2.952459 9.630884 0 0 1 12 2005 17 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 90 6 4.1562023 2.101981 3.01528 9.630884 0 0 1 12 2010 17 "Australia" "Benin" "BEN" "AUS" "NONE" 0 0 0 91 7 4.3184686 2.2523227 3.092487 9.630884 0 0 1 13 1980 0 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 92 1 3.58461 1.9202758 2.687303 9.675223 0 0 1 13 1985 0 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 93 2 4.041782 2.0448387 2.757348 9.675223 0 0 1 13 1990 0 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 94 3 3.9467635 2.1760046 2.8370354 9.675223 0 0 1 13 1995 6 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 95 4 4.4584155 2.3115325 2.894364 9.675223 0 0 1 13 2000 10 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 96 5 4.56776 2.45169 2.952459 9.675223 0 0 1 13 2005 11 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 97 6 4.4251833 2.59689 3.01528 9.675223 0 0 1 13 2010 14 "Australia" "Burkina Faso" "BFA" "AUS" "NONE" 0 0 0 98 7 4.470631 2.7434356 3.092487 9.675223 0 0 1 14 1980 493 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 99 1 3.837249 4.4127793 2.687303 9.067316 5.680172 0 1 14 1985 690 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 100 2 3.909851 4.546351 2.757348 9.067316 5.680172 0 1 14 1990 1648 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 101 3 4.173528 4.6764283 2.8370354 9.067316 5.680172 0 1 14 1995 3503 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 102 4 4.1641855 4.786404 2.894364 9.067316 5.680172 0 1 14 2000 6266 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 103 5 4.1086874 4.885701 2.952459 9.067316 5.680172 0 1 14 2005 7112 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 104 6 4.391068 4.963789 3.01528 9.067316 5.680172 0 1 14 2010 8003 "Australia" "Bangladesh" "BGD" "AUS" "NONE" 0 0 0 105 7 4.2181625 5.01811 3.092487 9.067316 5.680172 0 1 15 1980 1525 "Australia" "Bulgaria" "BGR" "AUS" "NONE" 0 0 0 106 1 1.505199 2.18172 2.687303 9.603973 6.943122 0 0 15 1985 1586 "Australia" "Bulgaria" "BGR" "AUS" "NONE" 0 0 0 107 2 1.763892 2.1928313 2.757348 9.603973 6.943122 0 0 end
I am attempting to fit a PPML with fixed effects model, so I am running this:
. ppmlhdfe tot fta_wto ln_gdp_diff_cap ln_distw wto_member ln_initial_stock contig colony comlang_off, absorb (imp_time exp_time) cluster(id)
note: 2 variables omitted because of collinearity: ln_gdp_diff_cap wto_member
Iteration 1: deviance = 2.690e+08 itol = 1.0e-04 subiters = 6 min(eta) = -5.33 [p ]
Iteration 2: deviance = 1.361e+08 eps = 9.77e-01 itol = 1.0e-04 subiters = 5 min(eta) = -6.84 [ ]
Iteration 3: deviance = 9.961e+07 eps = 3.66e-01 itol = 1.0e-04 subiters = 5 min(eta) = -8.55 [ ]
Iteration 4: deviance = 9.266e+07 eps = 7.51e-02 itol = 1.0e-04 subiters = 5 min(eta) = -9.82 [ ]
Iteration 5: deviance = 9.181e+07 eps = 9.27e-03 itol = 1.0e-04 subiters = 5 min(eta) = -10.59 [ ]
Iteration 6: deviance = 9.169e+07 eps = 1.25e-03 itol = 1.0e-04 subiters = 6 min(eta) = -11.61 [p ]
Iteration 7: deviance = 9.168e+07 eps = 1.53e-04 itol = 1.0e-04 subiters = 3 min(eta) = -12.26 [ ]
Iteration 8: deviance = 9.167e+07 eps = 1.50e-05 itol = 1.0e-04 subiters = 2 min(eta) = -12.81 [ ]
Iteration 9: deviance = 9.167e+07 eps = 1.21e-06 itol = 1.0e-06 subiters = 3 min(eta) = -13.16 [ ]
Iteration 10: deviance = 9.167e+07 eps = 1.07e-07 itol = 1.0e-06 subiters = 2 min(eta) = -13.42 [ ]
Iteration 11: deviance = 9.167e+07 eps = 7.21e-09 itol = 1.0e-08 subiters = 11 min(eta) = -13.62 [ps ]
Iteration 12: deviance = 9.167e+07 eps = 7.00e-11 itol = 1.0e-10 subiters = 13 min(eta) = -13.64 [pso]
Iteration 13: deviance = 9.167e+07 eps = 2.93e-15 itol = 1.0e-10 subiters = 13 min(eta) = -13.64 [pso]
------------------------------------------------------------------------------------------------------------
(legend: p: exact partial-out s: exact solver o: epsilon below tolerance)
Converged in 13 iterations and 79 HDFE sub-iterations (tol = 1.0e-08)
HDFE PPML regression No. of obs = 23,104
Absorbing 2 HDFE groups Residual df = 3,514
Statistics robust to heteroskedasticity Wald chi2(6) = 1511.85
Deviance = 91674760.25 Prob > chi2 = 0.0000
Log pseudolikelihood = -45909225.15 Pseudo R2 = 0.9459
Number of clusters (id) = 3,515
(Std. Err. adjusted for 3,515 clusters in id)
----------------------------------------------------------------------------------
| Robust
tot | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-----------------+----------------------------------------------------------------
fta_wto | .0066152 .0802348 0.08 0.934 -.1506422 .1638726
ln_gdp_diff_cap | 0 (omitted)
ln_distw | -.2374152 .0624547 -3.80 0.000 -.3598241 -.1150062
wto_member | 0 (omitted)
ln_initial_stock | .5596938 .0337345 16.59 0.000 .4935755 .6258122
contig | .2051182 .114665 1.79 0.074 -.019621 .4298575
colony | .2407653 .1003744 2.40 0.016 .0440351 .4374954
comlang_off | .2905784 .103064 2.82 0.005 .0885766 .4925801
_cons | 7.922486 .7559825 10.48 0.000 6.440788 9.404185
----------------------------------------------------------------------------------
Absorbed degrees of freedom:
-----------------------------------------------------+
Absorbed FE | Categories - Redundant = Num. Coefs |
-------------+---------------------------------------|
imp_time | 133 0 133 |
exp_time | 1223 7 1216 |
-----------------------------------------------------+
As you can see, two variables are ommitted due to collinearity with the fixed effects (I know this because if I run the same especification, they are not dropped, although the sign on the other coefficients flips in a way that the coefficients are counter intuitive).
I constructed the GDP per capita differential as the ln of the GDP per capita in the destination country over the GDP per capita in the origin country. The fta_wto variable simply indicates whether the two countries share a RTA.
Could you help me on how to proceed, please? Is there any possibility that I am incorrectly specifying the model?
Many thanks in advance,
Julia
0 Response to Collinearity with fixed effects
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