Dear Statalisters.
I have a simple question: if the answer is well known to everyone but me,
apologies, but I am living in Tanzania where there is a dearth of
statisticians and stats books, and I have trawled the internet and the
statalist archives to no avail.
I am running a panel regression with a dichotomous variable using xtlogit.
I was getting strange (unexpected) results, and realized 2 of my independent
variables were highly correlated (correlation coefficient 0.92). So I
omitted one and the results were much more in line with other tests. But in
my list of independent variables I still have a variable for age (of panel
subject) and a variable for the square of age. These 2 variables are, of
course, also highly correlated. So why is it correct to leave both these
highly correlated variables in the regression, and yet to exclude the other
highly correlated variable?
Any enlightenment much appreciated.
Alexandra Wilson