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Re: st: A question about fixed-effect regression


From   "Austin Nichols" <austinnichols@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: A question about fixed-effect regression
Date   Fri, 3 Nov 2006 16:43:53 -0500

Dear Hui Wang "Jackie"--
The observations you exclude *do* offer information about the effect
of x2 on y, even allowing for an id-specific intercept.  If you left
out x2 as an explanatory variable, you would get exactly the same
coefficient in both specifications.

input id      y       x1      x2
1       4       1       2
1       13      0       6
1       2       0       5
2       5       0       7
2       7       0       9
3       9       1       5
3       10      1       3
3       12      0       1
4       12      1       4
4       15      1       7
end
iis id
xtreg y x1 x2, fe
xtreg y x1 x2 if id!=2 & id!=4, fe
xtreg y x1, fe
xtreg y x1 if id!=2 & id!=4, fe

On 11/3/06, Hui Wang <jackie_stata@hotmail.com> wrote:
Here is a question about the fixed-effect regression.
I want to estimate the effect of x1 on y (controlling for x2) using fixed
effect regression.
But notice that for id=2 and id=4, x1 does not vary within the same id. If
the fixed effect realy make use of the variation within the same id, may be I should exclude these observations.
The coefficient on x1 in these two regressions are closed but not exactly
the same, so are their standard errors.
My question is: which one make more sense?
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