# st: egen and computing fixed effects

 From "Tim R. Sass" To statalist@hsphsun2.harvard.edu Subject st: egen and computing fixed effects Date Tue, 22 Jun 2004 15:25:08 -0400

Statalisters -

I am trying to "manually" compute a fixed-effects estimator by taking the differences from means of all variables and then running reg on the demeaned data. You may ask why in the world I would want to do that, but that's for another post.

I have a panel of student-level data over three years. I demean the data as follows:

bysort student:egen nrtrgain_m = mean(nrtrgain);
bysort student:egen charter_m = mean(charter);
bysort student:egen nschools_m = mean(nschools);
bysort student:egen chgschl_m = mean(chgschl);

gen d2_nrtrgain = nrtrgain - nrtrgain_m;
gen d2_charter = charter - charter_m;
gen d2_nschools = nschools - nschools_m;
gen d2_chgschl = chgschl - chgschl_m;

I then run the following models:

areg nrtrgain charter nschools chgschl,
absorb(student) ;

reg d2_nrtrgain d2_charter d2_nschools d2_chgschl ;

xtdata nrtrgain charter nschools chgschl, fe clear;
reg nrtrgain charter nschools chgschl;

The first and third models yield the same estimated coefficients (except for the constant, of course), but the coefficients for the second model (using reg on the demeaned variables) yields different results. However, when I eliminate all observations with missing values for any of the variables in the model, all three models yield identical estimated slope coefficients.

I'm guessing the problem has something to do with how egen computes the mean for each student when there are missing observations. I have read through the manual and searched the archives, but still can't figure out what is going on. Any help would be greatly appreciated.

Tim

Tim R. Sass
Professor Voice: (850)644-7087
Department of Economics Fax: (850)644-4535
Florida State University E-mail: tsass@coss.fsu.edu
Tallahassee, FL 32306-2180 Internet: http://garnet.acns.fsu.edu/~tsass

*
* For searches and help try:
* http://www.stata.com/support/faqs/res/findit.html
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/