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From |
John Antonakis <john.antonakis@unil.ch> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Estimating firm level data on regional level data using a within estimator. |

Date |
Sun, 06 Jun 2010 16:38:56 +0200 |

No problem.....have your carthatic moment ! ;-) No offense taken. Best, J. ____________________________________________________

Department of Organizational Behavior University of Lausanne Internef #618 CH-1015 Lausanne-Dorigny Switzerland Tel ++41 (0)21 692-3438 Fax ++41 (0)21 692-3305 Faculty page: http://www.hec.unil.ch/people/jantonakis Personal page: http://www.hec.unil.ch/jantonakis ____________________________________________________ On 06.06.2010 16:34, Maarten buis wrote:

--- On Sun, 6/6/10, John Antonakis wrote:The assumptions of the estimators must be met. If the assumptions of the random effects estimator are not met, and if the Hausman test shows that the estimator is notconsistent then the researcher has to bite the bullet!It is the same thing as estimating a regression model whereyou know that x correlates with the disturbance and yet you go ahead and estimate the model in any case. The coefficient of x could be higher, lower, or of a different sign. What is the use to society to report estimates that one knows to be inconsistent?Inconsistent and bias critically depends on what you wantto know: linear regression and random effects will give you aconsistent estimate on how the averages differ between groups.So a statement that estimate XYZ is inconsistent or biased ismeaningless unless you first specify (explicitly or implicitly)what it is that you exactly want to know. Fixed effects estimators are controlling for all unobserved variables that are constanton the higher level unit. However, you often do _not_ want tocontroll for all variables, e.g. intervening variables. Sincefixed effects indiscrimately controlls for all higher level variables, the fixed effects regression will be a inconsistent estimate for a large (probably the largest) subset of parametersof interest. On the other hand, fixed effects do not control forall unobserved variables you might want to control for, inparticular those that aren't constant on the higher level. Soagain there are a large set of parameters of interest for whichfixed effects are inconsistent.In essence the only way to reliably controll for unobservedvariables is to observed them. Even a randomized experiment willonly work if the paremeter of interest is a linear combinationof means (and I am ignoring the problem of external validity).All this is not to deny that randomized experiments and fixedeffects regression are useful tools in ones statisticaltoolbox, but they are just that, a tool with advantages anddisadvantages.I am being a bit hard, I guess this has more to do with myfrustration with some of the recent converts in my discipline.As is often the case, the recent converts are the worstfundamentalists. My impression is that in many cases wherepeople in my discipline use fixed effects regression thosepeople have no idea what they want to controll for (otherthan that they want to control for "everything"), which tome means that those estimates are exactly meaningless.Anyhow, as I said, my frustration is with people who abusea method they don't understand, and obviously none of thisapplies to you. So don't take any of this personally.-- Maarten -------------------------- Maarten L. Buis Institut fuer Soziologie Universitaet Tuebingen Wilhelmstrasse 36 72074 Tuebingen Germany http://www.maartenbuis.nl --------------------------* * 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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**Follow-Ups**:**Re: st: Estimating firm level data on regional level data using a within estimator.***From:*natasha agarwal <agarwana2@googlemail.com>

**References**:**Re: st: Estimating firm level data on regional level data using a within estimator.***From:*Maarten buis <maartenbuis@yahoo.co.uk>

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