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From |
Austin Nichols <austinnichols@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Fixed effects and standard errors and two-way clustered SE |

Date |
Wed, 8 Sep 2010 14:42:09 -0400 |

startistiker <diudas1@gmail.com> : I would be inclined to use SEs clustered by firm; 14 years is not a large number for these purposes, but 52 is probably large enough. Of course, you should simulate the performance of these SEs using your data if you want a better answer. On Wed, Sep 8, 2010 at 4:24 AM, startistiker <diudas1@gmail.com> wrote: > I have a question regarding standard errors in a two-way fixed effects > covariance model. > > I'm using panel data (firm (52 obs.), year (14 obs.)) which is unbalanced > (some of the firms have missing firm-years) in a two-way fixed effects model > (firm and year dummies). > > Eq. (1): Y = b1*X1 + b2*X2 + b3*FE(firm)+b4*FE(year)+e > (intercept is suppressed) > > All variables are scaled, the first (b1) is a scaled intercept (1/scale). I > want to test the effect of a treatment by adding a dummy (treatment=1, > otherwise 0) for the years a firm is affected by the treatment: > > Eq. (2): Y = b1*X1 + b2*X2 + b3*FE(firm)+b4*FE(year)+b5*treatment+e > (intercept is suppressed) > > The whole sample consists of 220 treatment years and 400 non-treatment > years. Every firm has at least on treatment and one non-treatment year. > > Question: Now I am not sure about the correct kind of standard errors I > should use in my t-statistics? > > So far I tried the standard t-test, Huber/White standard errors > (,cluster(mark) command) and two-way clustered standard errors (Cameron, > Gelbach, and Miller; cgmreg in Stata). > > Question: Which one is recommandable and why (in context of the two-way FE > model)? > Results are, as expected, much weaker by using the latter. > > Question: To you have general recommendations what to test in this kind of > approach or to what i have to pay special attention? > > Tests I have also done so far: > - Hausman between FE and RE -> FE recommended (Chi2 11.88) > - F-Test of year dummies -> inclusion recommended (F-Test 2.99) > - Wooldridge test for autocorrelation -> AR exists (F-Test 11.590) > - Breusch-Pagan for heteroskedasticity -> Het exists (F-Test 77.93) > > Question: Regarding the Hausman test: should I run it with the treatment > dummies (Eq. 2) or without (Eq. 1)? At the moment the results for the > Hausman test above are with usual intercept and without the scaled intercept > of Eq. 1, is that ok? Can anybody explain to me, why I need a scaled > intercept? (used it because the original model used it, but more or less > without explaining). > * * 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/

**References**:**st: Fixed effects and standard errors and two-way clustered SE***From:*startistiker <diudas1@gmail.com>

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