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st: fixed effects and indicator variables
I am estimating life-time income by adding annual incomes. Based on the
(1984-99), I need to estimate annual incomes for the years which are not
my panal data.
Wit = XitB + Ai + eit.
For the estimation of the annual incomes, I am using the fixed-effect
indicator variables (job dummy). For the variables X, I am using e.g
ages, number of
kids, job dummies and a CONSTANT.
I am wondering if I can use ALL job dummies without omitting one of them
the same time including a CONSTANT term in the fixed-effect model.
My test results show that the estimation result using the above method
is much better
that the one omitting one job dummy variable and including a CONSTANT.
answers will be highly appreciated.
Kwandong University, Korea
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