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st: perfect collinearity between age and year in fixed effects estimation and time dummies


From   "alessia matano" <alexis.rtd@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: perfect collinearity between age and year in fixed effects estimation and time dummies
Date   Tue, 8 Jul 2008 12:48:14 +0200

Dear all,

I write you about a question concerning perfect collinearity between
age and year in a fixed effects regression. I have indeed a panel of
workers and i am running a regression of the workers wages on some
individual characteristics and other varibales. Hence, i use fixed
effects estimation to control for individual heterogeneity. However,
when i run the fixed effects regression and i put the time dummies
(say 1991-2002, hence d1992-d2002) he drops me a further time dummy. I
know and understand that year and age are collinear, but i do not
understand well how this collinearity reflects into the time dummies,
especially when they are demeaned from time average. Anyone of you can
help me?
It would be already great to understand which is the linear
combination of time dummies that gives me the age variable..

thank you
alessia
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