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Re: st: interacted fixed effects

From   Scott Cunningham <>
Subject   Re: st: interacted fixed effects
Date   Thu, 27 Apr 2006 08:53:24 -0400

Dear Kremena,

Stata has the ability to do this automatically within its -xt- commands. If you were wanting to eliminate the within importer fixed effects in a linear model, it would be:

xi:xtreg depvar indepvar, fe i(identifier)

where identifier identifies each importer. You would include year and exporter effects by:

xi:xtreg depvar indepvar i.year i.exporter, fe i(identifier)

Try this and it should do what you're wanting it to do.


On Apr 27, 2006, at 2:48 AM, Kremena Platikanova wrote:

Dear List Members,

I have a panel of bilateral trade data. I want to estimate a model with
importer-year, exporter-year and importer-exporter fixed effects:
Y_ijt = a_it + b_jt + c_ij + d*X_ijt + e_ijt
where i = importer, j = exporter, t = time.

If using dummy variables is not feasible, is it appropriate to demean the data
in the following way:
Y_ijt* = Y_ijt - MeanY_it - MeanY_jt - MeanY_ij + 2*Overall MeanY
(where MeanY_it is Y_ijt avaraged over j) and similarly for X_ijt*, and then
regress Y_ijt* on X_ijt*.

Thank you for your help,

Kremena Platikanova
Ph.D. Candidate
Department of Economics
University of Colorado, Boulder
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