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From |
Stas Kolenikov <skolenik@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Re: testing for cross-sectional independence |

Date |
Sat, 9 Oct 2004 12:21:35 -0400 |

> > I have an unbalanced panel for several hundred firms. the maximium > > length is 7 whereas the short is 1 for some of the firms. the mean length is > > 5.4. > > > > I want to fit a fixed effect regression while one of my supervisor > > prefers poolling regression. I don't know what kind of test can i use > > to choose models between them > > > > can u give me some suggestions? . use http://www.stata-press.com/data/r8/nlswork.dta (National Longitudinal Survey. Young Women 14-26 years of age in 1968) . xtreg ln_wage union coll , fe i(id) Fixed-effects (within) regression Number of obs = 19238 Group variable (i): idcode Number of groups = 4150 R-sq: within = 0.0146 Obs per group: min = 1 between = 0.0627 avg = 4.6 overall = 0.0412 max = 12 F(1,15087) = 223.79 corr(u_i, Xb) = 0.1228 Prob > F = 0.0000 ------------------------------------------------------------------------------ ln_wage | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- union | .1106144 .0073942 14.96 0.000 .0961208 .125108 collgrad | (dropped) _cons | 1.728786 .0026265 658.22 0.000 1.723638 1.733934 -------------+---------------------------------------------------------------- sigma_u | .42531648 sigma_e | .27368425 rho | .70717789 (fraction of variance due to u_i) ------------------------------------------------------------------------------ F test that all u_i=0: F(4149, 15087) = 7.75 Prob > F = 0.0000 The F-test is what you are looking for: are all of the fixed effects equal to zero? If yes, we can pool the data. Here, we obviously cannot do that. Note that -xtreg, fe- will either explicitly or implicitly drop panels with one observation only. If that is a concern for the sample to become unrepresentative of the population, then you are bound to use some sort of random effects procedures or multilevel analysis that economists generally don't seem to have a lot of respect for. -- Stas Kolenikov http://stas.kolenikov.name * * 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/

**References**:**st: Re: testing for cross-sectional independence***From:*Christopher F Baum <baum@bc.edu>

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