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Re: st: state trends

From   Maarten buis <>
Subject   Re: st: state trends
Date   Tue, 19 Oct 2010 08:23:39 +0100 (BST)

--- On Mon, 18/10/10, sara borelli wrote:
> I am running a model with state and year fixed effects and
> I need to add state specific time trends. I created a dummy
> for each state and interacted it with the variable year,
> where year=1990,1991,1992,1993...
> The trend variables created are:  trendstate1 
> trendstate2 ....trendstate51
> I also re-scaled the year variable so that
> yearnew =1 if year==1990; =2 if year==1991; =3 if
> year==1992  and so on. The trend variables in this case are: 
> trendnewstate1...trendnewstate51
> I then regressed:
> xi: y  x  i.year i.state trendstate1-trendstate51
> and 
> xi: y  x  i.yearnew  i.state trendnewstate1-trendnewstate51
> the coefficient of my X variable of interest is the same in
> both regressions but the coefficient on the state fixed
> effects are very different. It must be due to the rescaling
> of the year variable, but I am not sure why.

In the top regression you get for each state the deviation 
from the reference state in the expected y if x = 0 in the year 
0 (i.e. 2010 years ago). Which is probably a "not-so-mild"
extrapolation. In the bottom regression you get the same, but
now for 1989.

> I then tried to add a quadratic time trend. That is I
> interacted each state dummy with year2=year*year.
> Then I run
> xi: y  x  i.year i.state trendstate1-trendstate51         
>    trendsquarestate1-trendsquarestate51 
> but stata altogether drops the state fixed effects
> However, if I create   yearnew2=yearnew*yearnew and
> quadratic trends based on it and run
> xi: y  x  i.year   i.state 
> trendnewstate1-trendnewstate51   trendnewsquarestate1-trendnewsquarestate51
> then stata does not drop the state fixed effects and
> estimates differ I am not sure what is going on or what
> I am doing wrong

The devil is in the detail, it probably depends on exactly
what variables are in the list trendstate1-trendstate51. 

In simular situations I usually work these things out for 
one state, and than start creating interactions. Actually,
I usually start with trying to bypass that step, get into
trouble, and than go back and work it out step by step.

Hope this helps,

Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen


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