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st: re: WLS and dummies


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: WLS and dummies
Date   Sun, 17 Apr 2005 15:19:03 -0400

Javier wrote

I would like to ask a question that I had before but I
couldnt solve. The problem I have is the following: Im
aplliying shif-share method in a regression of data
panel. My dependent variable is the growth in
employment and I have as independent variables dummies
for industries, dummies for years and for regions. The
problem arises because I loose one region, one year
and one industrie because of the dummies use. I dont
want to loose this since they are useful for the
analysis I'm doing. Does anyone have an idea how to do
this?.

You can always include ONE complete (mutually exclusive and exhaustive) set of dummies in a regression by excluding the constant term. You gain nothing by doing so; the coefficients are just measured vs. zero rather than vs. the excluded class. But you cannot include TWO or more complete sets of dummies in a regression, irregardless of the treatment of the constant term, since each set of dummies sums to an iota vector of length N, and you can't have two of those in your regression. But then you don't need to; you can always calculate all the coefficients, in point and interval form, from the (G-1) dummies' coefficients. The lincom command is useful here.

Kit Baum, Boston College Economics
http://ideas.repec.org/e/pba1.html

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