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From |
Ralph.Heinrich@unece.org |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Panel ID and Time Variable |

Date |
Tue, 12 Apr 2005 16:36:44 +0200 |

... Just setting the panel ID to nations without setting a time ID (presumably with - iis nations - ?) will not do anything imho (try writing . iis, clear and re-estimate your regression; the result should be unchanged; it should also be unchanged if you use - iis individuals - or even - iis waves -). What you get is a "pooled" regression of 40,000 observations with no distinction between nations, individuals or waves. This means for instance that you cannot use lags or first differences because no time series dimension is defined (try it). More importantly, it means that in your estimation results, the information contained in all observations will receive the same "weight". By contrast, the advantage of panel regressions is that you can give different "weights" to information coming e.g. from one additional observation on a given individual and to information coming from observing an additional individual (if you are interested in knowing what color the cows in Scotland typically are, you learn little by observing a given cow one more time, but you learn a lot by observing one more cow for the first time :-). In that sense, a pooled model is not using the information in the data optimally (unless for your purpose equal weighting is appropriate on a priori grounds). To run a true panel regression, every observation has to be uniquely identified, i.e. it has to correspond to one "unit" at one point in time. It is conceptually not possible to run a panel regression where a variable is observed more than once for a given "unit" at a given point in time. Therefore your panel ID has to be the individual (if you absolutely want it to be nations rather than individuals, then the only way to do it is to discard the individual-level information, most likely by averaging over individuals for every nation at every point in time, as you suggested earlier). If your panel is just unbalanced (i.e. mostly the same individuals across time, with some dropping out and some joining, and the dropping out and joining in can be considered random), use - tsset individuals waves - and include country dummies in your regressions; Stata handles unbalanced panels automatically (a problem may occur if you have individuals who are in the first and last waves but not in the second). If the sets of individuals in the different waves are (largely) disjoint, however, an alternative may be to just estimate separate cross-sections for all waves (again with individuals as units of observation and with country dummies). Best R. Dr. Ralph Heinrich Economic Affairs Officer Economic Analysis Division UN Economic Commission for Europe room 441 Palais des Nations 1211 Geneva 10 phone: 0041 22 917 1269 http://www.unece.org/ead/ead_h.htm * * 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/

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