Andrea,
Quoting Christopher F Baum <[email protected]>:
> On Jun 4, 2004, at 7:33 AM, Andrea wrote:
>
> > Thanks for that. However, adding 420 dummies to my model would
> only
> > work
> > when estimating a pooled OLS, but not a within estimator (since
> the
> > fixed
> > effects model would drop anything that is invariant over time).
> > Any hints for doing that in fixed effects?
>
> A one-way individual fixed effects model drops any variable that is
> constant for an individual, such as gender or race. As in previous
> post, it makes no difference algrebraically whether you estimate
> this
> model with the within transformation or by explicit dummy variables.
> The rank of X'X will be the same any way you do it. You cannot
> include
> time-invariant variables in an individual FE model.
>
> Kit
Kit is right, but it's perhaps worth noting that you can include such
variables in a random effects model.
Cheers,
Mark
>
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>
Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
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