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st: re: missing dummy variable


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: missing dummy variable
Date   Wed, 10 Oct 2007 14:50:42 -0400

John said

reg mpg foreign domestic, noconst hascons
xi3: regress mpg e.foreign
xi3: regress mpg e.make
*------------------ end example ---------------

Its clear that the information in the first two regressions is
equivalent, but the display would be better still if it was a
combination of both! If the _cons from the second regression was
combined with the explicit listing of both indicators in the first.

When the list of indicator variables gets long (as in the third
regression) , and especially when there are interactions, the task of
interpreting the dropped variables (and especially significance in the
t-test relative to the grand mean) becomes non-trivial (to me at least).


For the regression on make,

xi: reg mpg i.make

will produce a constant term which _is_ the coefficient on the omitted make.
Note that xi3 DOES NOT do that! Its constant term is the grand mean, and it is a pain in the rear to compute the missing coefficient from that (it is the constant minus the sum of all the others, but - lincom- doesn't do wildcards). I don't think -xi3- is at all helpful in this regard.

Kit


Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html

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