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st: re: calculating growth rates in a panel dataset


From   Kit Baum <kitbaum@mac.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: calculating growth rates in a panel dataset
Date   Mon, 13 Oct 2008 08:46:53 -0400

< >
Martin suggested

- bys id: g salesgrowth=(sales[_n]-sales[_n-1])/sales[_n-1]-

This works, but I spend some time every year when I lecture about panel data explaining to students why it is a Very Bad Idea to do so.

bys id: g salesgrowth = D.sales/L.sales
or
bys id: g salesgrowth = log(D.sales)

is a much safer way to do this, as the time-series operators will catch any issues with the time index (what if period 4 was not recorded for a given firm?). It requires that the data be -xtset- or - tsset-, and doing so will also catch some miscoding if the time index. Best to have Stata look for such mistakes in the process of data transformation. Very misleading results can be produced if you use explicit subscripts and the observation is completely missing (not Stata missing, but not recorded at all).

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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