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Re: st: Multicollinearity


From   "Clive Nicholas" <Clive.Nicholas@newcastle.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Multicollinearity
Date   Sat, 7 Aug 2004 04:09:29 +0100 (BST)

Cordula Stolberg wrote:

> I have a question related to multicollinearity. I run the following
> regression:
>
> xi: ivreg2 lfrag lfdi (lspec = lexp liit76 liit54) i.dapp_cz i.dapp
> i.dapp_slvk i.dag i.dneg i.dneg_slvk i.dgo i.dcz i.dhun i.dslvk
>
> The problem is that Stata -no matter whether I use -ivreg2-, -reg-, or
> -xtreg- includes the variable "i.dneg_slvk" always twice and then drops it
> to avoid multicollinearity (see below):

[...]

> Does anyone know why Stata does this and how I can avoid it? Any
> suggestions would be much appreciated.

I think this is a problem that has to be 'played by eye', as it were. One
solution would be to download Phil Ender's -collin- package from SSC, so
that you can evaulate just which variables are co-linear with which
others. Once done, you then have to make a judgement as to whether those
variables that have very low tolerance ought to be dropped manually from
your model, which very well include the variable in question.

I hope that helps.

CLIVE NICHOLAS        |t: 0(044)191 222 5969
Politics              |e: clive.nicholas@ncl.ac.uk
Newcastle University  |http://www.ncl.ac.uk/geps
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