I have a minor technical inquiry on how to deal with "insufficient observations" with random effects model in panel setup. The details are provided below.
I am working with multiple countries, multiple commodities and multiple year panel (trade) data (with repeated observations) in each case. I have also a single dependent variable in each case and multiple explanatory variables as I have shown below in the loop. I am running a Hausman test with sigmamore option using this loop. While I am able to run the fixed effects model estimates at commodity level alright, the random effects model shows an error — "insufficient observations".
I am dealing with country level data (reporter_code=360). And I have been able to generate fixed effects estimates using the following loop. However, the random effect has not been able to generate the estimates. Instead, I obtained the error —"insufficient observations".
By examining the outputs from fixed effects model, I have established on average there are about 200 observations per commodity in majority of cases. I have also considered the number of explanatory variables just so that I have sufficient observations in each case. However, the random effects model is not working even when I considered one or two explanatory variables. It generates instead —"insufficient observations".
I have isolated a single country trade data (as opposed to multiple country data) to mitigate the problem of missing data. I have also cleaned missing data at country and commodity level. I am running the regression country by country using the command as shown below in the loop.
local econvars var1 var2 var3 var4 var5 var6 /*group of explanatory variables*/
local geogvars var1 var2 var3 var4 /*group of explanatory variables*/
local policyvars var1 var2 var3 var4 /*group of explanatory variables*/
local RTAs var1 var2 var3 var4 /*group of explanatory variables*/
local var1 var2 var3 var4 /*group of explanatory variables*/
local var1 var2 /*group of explanatory variables*/
local reporter_code = "360" /*country code*/
foreach num of local reporter_code{ /*country level */
foreach year of varlist periodI periodII periodIII { /*each period represents eight years in each case*/
foreach var of varlist comcode1-comcode24 comcode26-comcode64 comcode66{ /*comcode are dummies, total of 66*/
di "reporter_code=`num'"
di "year=`year'"
di "commodity_code=`var'"
capture noisily xtreg DependentVariable `econvars' `geogvars' `policyvars' `RTAs' `culturvars' IMR`var'_`year'_360 i.`year' c.fdiinflows#c.`var' if reporter_code==`num' & `year'==1 & `var'==1,fe
estimates store fixed
capture noisily xtreg DependentVariable `econvars' `geogvars' `policyvars' `RTAs' `culturvars' IMR`var'_`year'_360 i.`year' c.fdiinflows#c.`var' if reporter_code==`num' & `year'==1 & `var'==1,re
estimates store random
hausman fixed random,sigmamore
}
}
}
I would like your suggestions to address this problem.
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