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st: Disentangle unobserved state effect


From   "Gao Liu" <gao.liu@gmail.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Disentangle unobserved state effect
Date   Wed, 1 Aug 2007 22:40:37 -0400

Dear list subscribers:

Sorry that my question is not about Stata, but about econometrics. 

I am examining the impacts of some state-imposed policies, measured as a set
of dummy variables, on school districts. Some states adopt some of these
policies, others not. But if a state adopts one policy, it would apply to
all school districts in the state. In other words, a policy dummy variable
has the same value for all school districts within the same state. 

The dataset is an unbalanced panel, containing a sample of school districts
from different states in different periods. School district that appear in
this period generally would not be in the dataset next period, although some
exceptions exist.  Policies were adopted before the start period I am
looking at. And during my examining period, no states change their policies.


The problem is: since the dummy variables of interest are linear combination
of states, we can't include state dummy variables. Thus, the results of the
impact of these policies on school districts may capture some unobserved
state-wide effects.  It is not so convincing to simply interpret the
coefficients of those dummy variables as the policy impacts. Is there any
way to solve this problem? 

Thank you very much.


Gao


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