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st: panel data structure using fixed effect model


From   Man Jia <jia.m@neu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: panel data structure using fixed effect model
Date   Sun, 21 Sep 2008 12:09:33 -0400 (EDT)

Hi all,

I was wondering if I could get some help about  a general econometric 
question of structure of panel data using fixed effect model. Sorry 
that this question is not particular to any stata commands. I'm 
thinking some of our experts on statistics or econometrics could give 
me valuable comments.

I'm working with a panel data set of a group of individuals who have 
different ages in the beginning. My question is: can I do the fixed 
effect according to individual and age,like:

Y[i,a]=X'[i,a]B + r [i] + t[a] +u [i,a]              (1)
where
         i means individual
         a means age
         t means year dummy at different ages
         r means individual fixed effect

Accordingly, the data set will be like this:
---------------------------------------------------------------
ID   age     year      var1 at age18-20        var2 at age 18-20
1     18       1980     
1     19       1981  
1     20       1982

2     18       1978
2     19       1979
2     20       1980

3     18       1982
3     19       1983
3     20       1984
----------------------------------------------------------------
The reason that I have the idea of trying (1) is that my interest is 
age effect and I want to restrict the age in the range [18,20]. 

The above data structure is kind of weird since the usual way is like 
this:
Y[i,t]=X'[i,t]B + a[i,t]  +  r [i] + t +u [i,t]      (2)
Where i,t,a,r means the same as above( a means age)

The usual data set correspondent to (2) is: 
---------------------------------------------------------------
ID   year      age  var1 in year80-82       var2 in year 80-82
1    1980     18
1    1981     19         
1    1982     20  
     
2    1980     20 
2    1981     21 
2    1982     22

3    1980     16
3    1981     17
3    1982     18
----------------------------------------------------------------
or something like this:
---------------------------------------------------------------
ID   year      age  var1 in year80-82       var2 in year 80-82
1    1978      .
1    1979      .
1    1980     18
1    1981     19         
1    1982     20 
1    1983      .
1    1984      .

2    1978     18 
2    1979     19      
2    1980     20 
2    1981      . 
2    1982      .
2    1983      .
2    1984      .

3    1978      . 
3    1979      .
3    1980      .
3    1981      .
3    1982     18
3    1983     19
3    1984     20
----------------------------------------------------------------

Please let me know if there's anything unclear of my expression of the 
question.  So, is there any problem of using fixed effect like (1)? 

Any comments will be very helpful. I appreciate it. Many thanks!

Mandy

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