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Re: st: panel data structure using fixed effect model


From   Man Jia <jia.m@neu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: panel data structure using fixed effect model
Date   Sun, 21 Sep 2008 20:57:54 -0400 (EDT)

Hi Mr. Greenberg,

Thanks for your comments, especially pointing out the potential problem 
of age and year being perfectly confounded. I'll keep it in mind.

Thanks!
Mandy




David Greenberg wrote:


>Yes, you can do that. You should understand, though, that if everyone 
is 18 in the first year of your study, that age and year will be 
perfectly confounded. Consequently you will not be able to distinguish 
age effects from year effects. Depending on the subject of your study, 
that may or may not be a problem. David Greenberg, Sociology 
Department, New York University
>
>----- Original Message -----
>From: Man Jia <jia.m@neu.edu>
>Date: Sunday, September 21, 2008 12:10 pm
>Subject: st: panel data structure using fixed effect model
>To: statalist@hsphsun2.harvard.edu
>
>
>> 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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