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From |
Kit Baum <baum@bc.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
re: st: time trend or year effect for pooled data |

Date |
Fri, 12 Mar 2010 12:37:09 -0500 |

<> > To professor Kit Baum, thank you very much for your help. Would you > please let me know what is the test you mentioned at the end of your > last email (are those eight constraints accepted by the data? That is an > easily testable hypothesis.) Thanks. Say you estimate the model y_it = b_0 + b1_t, t=1,2,3 then the effects of time are b1, 2 b1, 3 b1, respectively. You estimate two parameters. Instead consider the model (sans constant) y_it = d_0 + d_1 T2 + d_2 T3 where T2, T3 are dummies for time=2 and time=3 respectively. You estimate three parameters. d_0 is the conditional mean of y | time=1. If the effect of time is linear, d_2 should be twice d_1. That is one constraint which can be tested or imposed. Run the enclosed, in which the effect of time is constructed to be nonlinear, and you can see the difference. ------------------------------ webuse grunfeld, clear drop if year>1937 tsset g y = year + 0.5*(year-1935)^2 + rnormal(0,1) // allow for time effects => three coeffs to be estimated reg y i.year test 2*1936.year = 1937.year // force linear trend => two coefficients to be estimated reg y year // enforce the linearity constraint const def 1 2*1936.year=1937.year cnsreg y i.year, c(1) -------------------------------- 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 * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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