# st: fixed effects with xtreg

 From Eleonora Bartoloni06 To statalist@hsphsun2.harvard.edu Subject st: fixed effects with xtreg Date Thu, 11 Jun 2009 21:11:10 +0100

```Hallo,

Is there someone who can help me in interpreting correctly  the constant term in a xtreg procedure with fixed effects?

I have estimated the following model:

xtreg ros lros, fe

I have obtained the following results:

Fixed-effects (within) regression               Number of obs      =     18102
Group variable: codice_i                        Number of groups   =      2586

R-sq:  within  = 0.1347                         Obs per group: min =         7
between = 0.9609                                        avg =       7.0
overall = 0.6225                                        max =         7

F(1,15515)         =   2415.35
corr(u_i, Xb)  = 0.7916                         Prob > F           =    0.0000

------------------------------------------------------------------------------
ros |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
ros |
L1. |   .3752229   .0076348    49.15   0.000     .3602578     .390188
_cons |   6.288536   .0885829    70.99   0.000     6.114903    6.462169
-------------+----------------------------------------------------------------
sigma_u |  3.7527417
sigma_e |  4.0508966
rho |  .46184853   (fraction of variance due to u_i)
------------------------------------------------------------------------------
F test that all u_i=0:     F(2585, 15515) =     2.24         Prob > F = 0.0000

I thought that the constant term (_cons=6.288536) was the average of the individual fixed effects.

Instead, if i compute summary statistics of the fixed effects obtained by using the following command:

summarize fe

Ithe results are:

Variable |       Obs        Mean    Std. Dev.       Min        Max
-------------+--------------------------------------------------------
fe |     18102    .0010154    3.752186  -20.95681   17.61897

How is possible that the mean value of the fixed effects  (.0010154) is so different with respect to the constant term in the xtreg output?

Which is the right interpretation of the constant term in the xtreg estimation with fixed effects?

Thank you for the attention
Eleonora Bartoloni

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