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st: Panel Data Analysis


From   "Sukhdev Kumar" <sukhdev.kumar@ntlworld.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Panel Data Analysis
Date   Thu, 15 Apr 2004 19:36:04 +0100

Hi all,

I'm pretty new to Stata and I was hoping someone might be able to help me
with a few queries (apologies for the length of the message). I have a
balanced panel of 78 countries with data for 2 time periods, 1999 and 2001.
I wanted to run the regression whereby the dependent variable is gdp growth,
and the independent variables are aids deaths, literacy rate, productivity
growth and population growth.

I ran xtreg...re i(country) and also xtreg...fe i(country) followed by the
xthausman test. I get the following results.


Hausman specification test (Warning:  xthausman is no longer a supported
command; use -hausman-.  For
 instructions, see help hausman.)

                ---- Coefficients ----
             |      Fixed       Random
   gdpgrowth |    Effects      Effects       Difference
-------------+-----------------------------------------
  aidsdeaths |  -.2627628    -.0446729        -.2180899
  prodgrowth |   .5323049     .5334939         -.001189
   popgrowth |   .1182492      .307154        -.1889048
    literacy |  -.4322142     .0048829        -.4370972

    Test:  Ho:  difference in coefficients not systematic

                 chi2(  4) = (b-B)'[S^(-1)](b-B), S = (S_fe - S_re)
                           =     5.31
                 Prob>chi2 =     0.2569

Both models are quite poor compared to what I expected but I don't
understand what the above results are telling me - can anybody help? Can I
also test for autocorrelation or heteroskedasticity before running another
model?

As both the fixed effects and random effects models were poor I also ran the
xtgls model with corr(ar1) panel(hetero) force and got much better results.
However, I don't really know whether I should have stated that the model had
both autocorrelation and heteroskedasticity problems (can I even have ar1
seeing as my two time periods do not follow each other?). I really need to
know which model I should use before I go on to run smaller regressions on
samples of my countries.

I'd really appreciate it if somebody could help me with this, and I
apologise in advance for my lack of expertise in this area!

Thanks

Dev
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