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Re: st: Literature Reference for Stata's Fixed-Effects Transformation


From   "Sebastian van Baal" <s.vanbaal@arcor.de>
To   <statalist@hsphsun2.harvard.edu>
Subject   Re: st: Literature Reference for Stata's Fixed-Effects Transformation
Date   Wed, 25 Aug 2010 11:51:25 +0200

Dear Conor and Martin: 

Thank you very much for your suggestions! I was unclear in stating my
problem: I am looking for a literature reference that explains why it is
possible to add the grand mean back in if the goal is to estimate a model
constant. Virtually all the econometrics text books I looked at (now
including Stock/Watson) state that the individual mean can be subtracted for
fixed-effects transformation. But no source I have so far includes the
adding-the-grand-mean-back-in step. Stata performs this "second step" and I
understand it, but I need a reference for formal reasons and to gain a
deeper understanding of the intricacies of estimating the model constant. 

I am almost sure that the Stata programmers did rely on some scientific
source when implementing this second step. I am looking for such a source. 

Any other suggestions? 

Thanks in advance, 
Sebastian

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