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Re: st: Question about Fixed Effects with lagged Explanatory Variables


From   "Mark Schaffer" <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Question about Fixed Effects with lagged Explanatory Variables
Date   Mon, 14 Mar 2005 11:47:40 -0000

Bob,

From:           	Bob Rijkers <bob.rijkers@pembroke.oxford.ac.uk>
Date sent:      	Mon, 14 Mar 2005 11:08:39 +0000 (GMT)
To:             	statalist@hsphsun2.harvard.edu
Subject:        	st: Question about Fixed Effects with lagged Explanatory Variables
Send reply to:  	statalist@hsphsun2.harvard.edu

> 
> Hi,
> 
> This is a follow-up on my previous e-mail which was perhaps not clear
> enough. My problem is not that I include a lagged value of the
> dependent variable as regressor in fixed estimation, but rather that I
> use a lag of an explanatory variable as an additional regressor. That
> is, I regress industrial productivity on proportion of the workforce
> trained this year, as well as on the proportion of the workforce the
> year before using the command xtreg, fe. 
> 
> Stata does not allow me to do this directly; the error message is that
> time-series operators are not allowed. When I generate a new variable
> for proportion of the workforce trained a year before, and thus do not
> use the lag-specification, my estimation goes through. 
> 
> My question is: am I doing something 'illegal' by recoding my variable
> and making the estimation go through;  are there inherent econometric
> problems with using the lag of an explanatory variable as an
> additional regressor? 

No and no.  For whatever reason, xtreg doesn't allow time-series 
operators (even though, for example, xtivreg does).  What you are 
doing is fine.

--MS

> 
> Yours,
> 
> Bob Rijkers
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS  UK
44-131-451-3494 direct
44-131-451-3296 fax
44-131-451-3485 CERT administrator
http://www.sml.hw.ac.uk/cert

*
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