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st: Clustering and fixed effects


From   "Yvonne Capstick" <yvonnecapstick@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Clustering and fixed effects
Date   Thu, 27 Apr 2006 12:42:46 -0400

Hi,

If I wish to run firm fixed effects in a panel data regression (firm x years), an efficient way of doing this is "xtreg y x, i(firm)".

An alternative is "qui tab firm, gen dum" and then "reg y x dum*". The first method I prefer as I don't see all of the coefficients on the dummy variables (which I am not interested in) and so the log files are substantially shorter.

I now wish to cluster standard errors by firm as well (since the FE only removes any constant term). However, I cannot seem to use the "cluster" command within xtreg: the only thing I can do is "reg y x dum*, cluster(firm)". But with this method I see all of the coefficients on the dummy variables, which I don't want to. Is there a way of having both clustered standard errors and FE without seeing the FE coefficients?

Thanks, Yvonne

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