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st: fixed effects and indicator variables


From   Sangho Kim <shkim@kwandong.ac.kr>
To   statalist@hsphsun2.harvard.edu
Subject   st: fixed effects and indicator variables
Date   Wed, 23 Oct 2002 16:44:57 +0900

Hello Everyone,

I am estimating life-time income by adding annual incomes. Based on the
annual data
(1984-99), I need to estimate annual incomes for the years which are not
covered in
my panal data.

Wit = XitB + Ai + eit.

For the estimation of the annual incomes, I am using the fixed-effect
model with
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
and at
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.
Your
answers will be highly appreciated.

Sangho Kim
Kwandong University, Korea
email: shkim@kwandong.ac.kr


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