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st: RE: Re: RE: Fixed-effects, unbalanced panel and time-invariant variable


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Re: RE: Fixed-effects, unbalanced panel and time-invariant variable
Date   Tue, 17 Oct 2006 17:19:18 +0100

Rodrigo,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Rodrigo A. Alfaro
> Sent: 17 October 2006 17:11
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Re: RE: Fixed-effects, unbalanced panel and 
> time-invariant variable
> 
> Dear Mark,
> 
> RE estimation is more restrictive than the current FE+BE. For 
> RE we need that time variant (TV) and time invariant (TI) 
> variables have to be uncorrelated with the cross sectional 
> unobservable (u_i)), if the assumption if false the TV and TI 
> estimates are inconsistent. But for this procedure
> (FE+BE) only TI estimates will be inconsistent (Hsiao 2003, 
> page 52-53).

Very clear - I understand now.

How does this help Barbara, though?  She says she's interested in the
coefficient on the TI variable in particular.  FE+BE doesn't help here,
or am I missing something?

Cheers,
Mark

> Of course under not correlation RE is more 
> efficient. The following example show you the 3 methods: 
> FE+BE, RE and LS.
> 
> In T1 we have the xtfevd output, T2+T3 the FE+BE without any 
> adjustment (the constant is added to T3 therefore the 
> constant in T2 is irrelevant). T4 is GLS RE, T5 is the LS and 
> T6 is MLE RE. It seems that std errors fot TI in T1 are too 
> much small in compare with other methods, maybe there is a 
> typo in the ado-file. T2+T3 give us a more reliable result 
> that we can compare with T4, T5 and T6. Look fem estimate 
> (gender dummy), GLS RE is similar to LS even that 75% of the 
> total variance is explained by u_i. For T6 the results are 
> close to FE in the case of coef but very different in the std 
> error of TI... any idea?
> 
> Best, Rodrigo.
> 
> 
> /******************** Example **************************************/
> qui {
> webuse psidextract
> tsset id t
> xtfevd lwage wks south smsa ms exp exp2 occ ind union fem blk 
> ed, invariant(fem blk ed) est store T1 xtreg lwage wks south 
> smsa ms exp exp2 occ ind union, fe est store T2 predict aux1, 
> r bysort id: egen aux2=mean(aux1) replace aux2=aux2+_b[_cons] 
> reg aux2 fem blk ed est store T3 xtreg lwage wks south smsa 
> ms exp exp2 occ ind union fem blk ed, re est store T4 reg 
> lwage wks south smsa ms exp exp2 occ ind union fem blk ed, re 
> est store T5 xtreg lwage wks south smsa ms exp exp2 occ ind 
> union fem blk ed, mle est store T6 } est table T*, se
> /******************** Example **************************************/
> 
> ----- Original Message -----
> From: "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
> To: <statalist@hsphsun2.harvard.edu>
> Sent: Tuesday, October 17, 2006 11:12 AM
> Subject: st: RE: Fixed-effects, unbalanced panel and 
> time-invariant variable
> 
> 
> Barbara,
> 
> > -----Original Message-----
> > From: owner-statalist@hsphsun2.harvard.edu
> > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of
> > PETITT Barbara
> > Sent: 17 October 2006 14:47
> > To: statalist@hsphsun2.harvard.edu
> > Subject: st: Fixed-effects, unbalanced panel and
> > time-invariant variable
> >
> > Hello,
> >
> > I have an unbalanced panel (for some firms, I have three
> > years of data, for others, two years or even only one year).
> > One of my independent variables is a time-invariant variable
> > and with fixed-effects models, its gets dropped. I
> > contemplated using the fixed effects vector decomposition
> > (xtfevd), but does it work for unbalanced panel?
> > Otherwise, is there any alternative?
> 
> Maybe I am missing something obvious, but why won't the 
> standard random
> effects estimator work for you?  -xtreg,re- etc.
> 
> --Mark
> 
> Prof. Mark Schaffer
> Director, CERT
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS
> tel +44-131-451-3494 / fax +44-131-451-3296
> email: m.e.schaffer@hw.ac.uk
> web: http://www.sml.hw.ac.uk/ecomes
> 
> 
> > Thank you.
> >
> > Barbara.
> >

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