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st: Re: -areg- question


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: -areg- question
Date   Fri, 18 Sep 2009 09:09:07 -0400

<>
This is misguided. If you have a dataset of children, identified also by their mothers, a family with one child will have one value of 1 and N-1 values of 0 in that mother's dummy variable. That variable still has variance over the N observations, so it will not be dropped from the regression. However that OBSERVATION is essentially dropped from the regression. The FE estimator allows each unit (mother) to have her own constant term, and when she only has one observation, that means that the value of that mother's coefficient will be chosen to make that observation's residual precisely zero. What that means is that if you drop all single-child families, you will change the number of observations, but those observations are not contributing to the explanatory power of the model anyway. However, changing N will affect small-sample standard errors, t statistics, etc. This is the problem of 'singleton dummies'.

Conceptually there is no meaningful difference between running a regression with one dummy per mother (regardless of number of children) with -regress-, using -areg- to absorb the mother_id variable, or xtsetting the data by mother_id and running -xtreg, fe-.

Kit

On Sep 18, 2009, at 2:33 AM, Sue wrote:

with
fixed effects using the variable "mother_rc", there are
obervations(children) with only one count per mother_rc, that is
mothers with only one child. Once I include the mother fixed effects,
those with only one child should be dropped from the regression since
with only one child, there is no variation within the mother.


Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html
   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html

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