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# st: Estimating firm level data on regional level data using a within estimator.

 From natasha agarwal To statalist@hsphsun2.harvard.edu Subject st: Estimating firm level data on regional level data using a within estimator. Date Sun, 6 Jun 2010 11:49:41 +0100

```Hello Everyone,

I hope someone can help me.

I estimate an equation where you VA of domestic firms (at the firm
level)= L of dom firms (at the firm level)+ K of dom firms (at the
firm level)+FDI(at the regional level)+time dummies.

So it looks like VA(it)=K(it)+L(it)+FDI(rt)+D(t)+e(it)

I estimate it with a within estimator, i.e. ur fixed effects. When I
do so the minute I include all the time dummies, FDI goes insig but
thats my main variable of interest. When Ii try to estimate it for
each region the same equation, FDI drops out.

The problem that I have found out is that FDI is behaving like a time
dummy because all the firms within a region for each year will have
the same value of FDI. So like FDI for Beijing in 2001 will be say
20000. so all the firms within the same region will have 20000 and the
time dummy for 2001 will be 1 so all the firms withinhe region will
also have 1 for 2001. So basically the variation for all the firms
within the same region will be zero as all the firms will have the
same FDI value for all the years from 2001-2005 which is in effect
like a constant and like a time dummy. So at the regional level the
variation is between regions and across time. But since am estimating
at the firm level the variation is only across time for al the firms
within the same region.

Hence, when I throw in all the time dummies + fdi, FDI goes insig and
when i try to estimate it for each province, FDI dropus out when i
include the time dummies. I have ran out of solutions. I have tried
including a time trend inst have tried including a time trend instead
of a time dummy, the results for the aerage remains insig but the time
trend alows me to estimate the same for each region. I have tried
allot of other things as well like standarsation and all but it all
doesn't seem to work for each year again.

I have also tried multi-level modeling like the xtmixed in stata but
frm the theoretical resources available that am reading on it, it
seems that it focuses more on the random effects intercepts and slopes
and I am not sure whether this is what i need to look at....

Does anybody have any suggestion?!?!?!

Thanks
Natasha

Do you have any suggestions?!?!?!?!?!?
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```