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RE: st: Re: panel: within and between dimension/correlated effect s


From   "Steven Stillman (LMPG)" <Steven.Stillman@lmpg.dol.govt.nz>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   RE: st: Re: panel: within and between dimension/correlated effect s
Date   Tue, 25 Feb 2003 18:43:34 +1300

Markus,
The way you take care of the heterogeneity bias (i.e. correlation between
unobserved individual effects and observed variables) is by only looking at
the within variation.  The only other option I know of is the correlated
random effects model (it is a Chamberlain idea but I don't know the cite
off-hand) where you specify the relationship between the unobserved
individual effects and observed variables (typically, a linear one).  This
type of model can be estimated in stata by putting your data in wide form
and running sureg on it with the appropriate constraints.  This is a bit
tricky and some versions of the model can't be estimated in stata because
they imply non-linear constraints.  I have some sloppy do-file code which
estimates this type of model, which I am happy to share but don't want to
circulate.  Contact me directly if you would like a copy of it.

Steve

> -----Original Message-----
> From:	MKF.Poschke@Student.Unimaas.NL [SMTP:MKF.Poschke@Student.Unimaas.NL]
> Sent:	Tuesday, February 25, 2003 2:39 AM
> To:	statalist@hsphsun2.harvard.edu
> Subject:	RE: st: Re: panel: within and between dimension/correlated
> effect s 
> 
> Scott, 
> 
> I cannot use a random effects estimator because of strong correlation
> between the individual effects and the regressors - heterogeneity bias
> according to Chamberlain. On the other hand, the fixed effects estimator
> throws out all the between variation. I know that there are ways of taking
> into account the heterogeneity bias, but do not know how to do it - that
> is
> why I wanted to know if anybody else does. 
> 
> Markus
> 
> 
> -------------
> > Greetings, 
> > 
> > I posted this question some time ago, without any reaction. Therefore, I
> 
> > will try to make it clearer. 
> > 
> > I am estimating a macroeconomic panel data model, and I am looking for
> an 
> > estimator that accomodates both the within and the between dimensions. 
> 
> Isn't the random effects estimator (xtreg, re) a weighted averaged of the 
> between and within results? 
> 
> Have you taken look at xtgee - it allows for variety of correlation
> structures 
> and semi-robust standard errors, though it is a population-averaged
> estimator. 
> 
> I hope this helps, 
> Scott 
> 
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