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Re: st: An econometric question


From   Maarten buis <[email protected]>
To   [email protected]
Subject   Re: st: An econometric question
Date   Sun, 8 Apr 2007 20:25:18 +0100 (BST)

--- "Roy,Suryadipta" <[email protected]> wrote:
> I have some questions on the interpretation of my results. 
> I have data on (say) 100 countries over a period of 15 
> years, i.e. a total of 1500 observations. Suppose, I am 
> running a model of the form:
> y= a0 + a1x1 + a2x2 + a3x3, where y, x1 and x2 are the 
> mean values of the original variables (say, z, z1 and z2) 
> over 15 years for all countries and x3 is a time-constant 
> variable (say, a region dummy).
> 
> Now, when I am running the above regression in the 
> original dataset (with 1500 observations), I am getting 
> significant results for x1, x2 and x3. Of course, all the 
> variables remain unchanged for any country over these 15 
> years.
> 
> On the other hand, if I "collapse" the dataset and run the 
> regression with 100 observations (for 100 countries), none 
> of the variables remain significant and the r-square goes 
> down as well. The mean values for y, x1 and x2 (and x3) 
> are however, the same in both the regressions.
> 
> I would greatly appreciate some help if understanding as 
> to why I am not getting the same results as in the first 
> regression.

If you have more cases, you have more bits of information going into
your estimate, so you are more confident about your results, so you are
willing to say that smaller deviations from your null hypothesis are
non-accidental, i.e. significant. So the question is: If you want to
regress averages over 15 years of a 100 countries, do you have a 100
cases (number of countries), or 1500 cases (number of year-countries)?
The answer (unfortunately) is that you have only a 100 cases. By using
year-countries (1500 cases) you are just duplicating the same
information, in other words, each year does not add any new info. 

Hope this helps,
Maarten


-----------------------------------------
Maarten L. Buis
Department of Social Research Methodology
Vrije Universiteit Amsterdam
Boelelaan 1081
1081 HV Amsterdam
The Netherlands

visiting address:
Buitenveldertselaan 3 (Metropolitan), room Z434

+31 20 5986715

http://home.fsw.vu.nl/m.buis/
-----------------------------------------


		
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