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Re: st: Why do i get different results with year robust clusters vs year dummies


From   Haillie Lee <nal@princeton.edu>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Why do i get different results with year robust clusters vs year dummies
Date   Mon, 2 May 2011 23:57:37 -0400

Dear Kit,

Thank you very much for your reponse. In other words, does that mean
that if i do robust cluster(country) absorb(year) it would be
equivalent to introducing year fixed effects? When i tried this, I
still found my coefficient to be different compared to the year
dummies model. However, this could be due to the fact that some of the
year dummies were omitted due to collinearity problem. Could this be
the reason?
Thank you very much and I deeply appreciate your help.

Sincerely,
Haillie

On Mon, May 2, 2011 at 11:50 PM, Christopher Baum <kit.baum@bc.edu> wrote:
> <>
> I am using areg and
> when I specify model as areg export political tension ( list of
> control variables), robust cluster(year) absorb(country) I find my
> coefficient to be significant. However, when I specifiy it with year
> dummies as areg export political tension (list of control variables)
> y1990 y1991 y1992......., absorb(country), my coefficient turns
> insignificant. Can someone help me why I see this inconsistency and
> let me know if one model is better than the other? I mean, what I
> observe seems counterintuitive because the results should be the same
> given that I am controlling for the year effect in both
> specifications.
>
> No, you're not. It is a common misconception that estimating a cluster-robust VCE 'controls for year effects'. It does not do anything of the sort. It gives you a different estimate of the VCE, but it does not alter the coefficients' point estimates. Therefore a model with year dummies is not the same as a model excluding them, and if the data say they are jointly significant, you should include them.
>
> Kit
>
> Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
>                              An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
>   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html
>
>
>
>
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>



-- 
Haillie Lee
PhD Student
Department of Government
Georgetown University

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