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Re: st: Xtreg is dropping dummy variable for OECD countries.
Steffen H. Gröning wrote:
> When running a regression on my panel data for per capita growth, i
> would like to include a dummy variable for the OECD Countries. Once
> using a fixed effects model however, it is dropped.
> May be it is just too late to work, but could somebody point out why
> Stata does that?
Because in FE models such effects don't vary over time: they are constant,
and thus can't be estimated.
Try interacting your OECD dummies with what you would consider to be your
key variables. However, this is only a practical solution if:
(a) you're not using too many OECD dummies; and
(b) you've not got too many key variables with which to interact those OECD
You don't say whether you were successful in fitting a random-effects
model, where Cov(x_it,u_it)=0 and where theta=1, or near as dammit for all
practical purposes. If you've hit lucky on both these counts, why not fit
an RE model instead, which will allow you to include these dummies?
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