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Re: st: panel data regression question (Stata and statistical question)


From   David Jacobs <jacobs.184@sociology.osu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: panel data regression question (Stata and statistical question)
Date   Wed, 21 Mar 2007 14:01:34 -0500

Any fixed-effects routine will drop any explanatory variables that remain constant within all cases. That isn't a characteristic of Stata; it is a characteristic of that estimator.

One work around that may possibly (?) be theoretically applicable is to interact the unchanging explanatory variable with another explanatory variable that does change. The resulting product will change, so the coefficient on this interaction term can be estimated in a fixed-effects model.

But, of course, using this approach means that the uninteracted variable that does change must be included in the model as well. The other main effect captured by the unchanging component of this product term need not (and in fact could not) be included in the model. This work around is not always applicable because theoretical considerations rule it out or statistical difficulties such collinearity (sp?) make it impossible.

D Jacobs

At 01:47 PM 3/21/2007, you wrote:

Hi,

I am new to Stata as I largely use SPSS.

I will explain my problem:
I have 2 years of data to do with the number of disclosure items (TOTALITEM) a company discloses on
its own website and the number of items that are disclosed on the government website for that
company.

I have a number of explanatory variables, 2 of which are dummy variables like Industry (Computing
or Non-Computing) and Location (UK or not). Also, proportion of foreign shareholders (PROPFOR) which
does not vary over the 2 years.
I have some continuous explanatory variables which do vary over the 2 years, ie LOGSIZE (company's
size), EQUITY.

Using Stata, I have been looking at Fixed, Between and Random Effects models using Panel Data.

I have gone to Statistics Time Series Setup and Utilities and declared dataset to be time series
and the time is YEAR (2005 and 2006) and Panel ID is Subject so my data looks like:

e.g.
Subject YEAR TOTALITEM Industry LOGSIZE
1 2005 20 1 18
1 2006 30 1 20
2 2005 50 0 25
2 2006 60 0 30
etc.

So to choose between Fixed effects or Random effects, I type the command:

1) xtreg totalitem propfor industry location logsize,fe
2) estimates store fixed
3) xtreg totalitem propfor industry location logsize,re
4) estimates store random
5) hausman fixed random

1) the fixed effects model in the output shows the coefficients for the independent variables which
vary across time, ie LOGSIZE and PROPFOR but those that do not vary are dropped.
2) the random effects model shows coefficients for all independent variables in the model.
3) hausman indicates no insignificant p-value
Therefore, this indicates I should use fixed effects model instead of random. My question is how do
I now specify a fixed effects model in Stata which shows me all the coefficients of all independent
variables as running the command
xtreg totalitem propfor industry location logsize,fe
will drop those that do not vary over 2 years.

Sorry, but I am only a beginner in Stata.

Thanks,
Paul

==================
Paul McGeoghan,
Application support specialist (Statistics and Databases),
University Infrastructure Group (UIG),
Information Services,
Cardiff University.
Tel. 02920 (875035).
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