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Re: st: Inclusion of fixed effects in tobit model for yearly and pooled data


From   David Jacobs <[email protected]>
To   [email protected]
Subject   Re: st: Inclusion of fixed effects in tobit model for yearly and pooled data
Date   Mon, 22 Jan 2007 13:37:40 -0500

I'm positive that it isn't legal to throw in case dummies to get fixed-effects; this technique should ONLY be used to convert OLS estimates to their fixed-effects counterparts. I racall that there's a Stata FAQ on this someplace on their web site.

It probably is OK to use year-specific dummies, but I haven't found clear confirmation of that from an econometrician.

Dave Jacobs

At 12:37 PM 1/22/2007, you wrote:

Dear all:

I have a basic question regarding fixed effects modelling (but I can't find an answer in any econometrics textbooks). I am trying to run a tobit model that regresses individual poverty upon a host of individual-level controls as well as the state poverty rate.

I would like to estimate separate models for each year (I have several repeated cross-sections) and for the pooled data, (then estimate the marginal effects), in order to explore the effect of the state poverty variable over time.

In the model for the pooled data, I have added fixed effects for time and for each state. However in the yearly models, I have removed state-level dummies because their inclusion alongside the state poverty rate would induce multicollinearity.

My question is the following: Is it legitimate to run a model on the pooled data using fixed effects (for time and each state), and then to compare the coefficient on the state poverty variable with coefficients derived from cross-sections for specific years (estimated without state dummies, since their inclusion would induce multicollinearity)?

Many thanks in advance.

Regards,
Brian



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