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Re: st: Problems with Fixed Effects Regression


From   Abubakr Saeed <abubakr.sd@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Problems with Fixed Effects Regression
Date   Mon, 30 May 2011 14:03:13 +0100

Thank you very much for clarification. I am much clear for the most
part, but whats about the Heckman's selection model, for a such sample
where I have almost 90-95% firms are listed and rest are unlisted. Do
you recommend to perform Heckman Selection test?

Saeed, Abubakr

On 30 May 2011 11:32, Maarten Buis <maartenlbuis@gmail.com> wrote:
> On Mon, May 30, 2011 at 11:45 AM, Abubakr Saeed wrote:
>> I'm performing a panel data analysis (400 firms, 12 years, and 6
>> industries). I got two questions regarding my analysis:
>> My LM test supports for random individual effects. After estimating
>> the Hausman test for deciding between fixed or random effect
>> regression, result was in favor of the fixed effect regression. I am
>> using Industry dummies which are constant over time. While running FE
>> my all industry dummies were dropped because of collinearity. What I
>> do? Should I just neglect industry dummies or choose random effect?
>
> When you estimate a fixed effects model you are controlling for
> everything that is constant within a firm. This is why Stata is
> dropping every variable that is constant within firms, these cannot
> explain anything after controlling for the fixed effects. If industry
> is just a control variable and you are not substantively interested in
> it, than you can just use a fixed effects model and leave industry
> out. You are not ignoring anything, as the fixed effects are already
> controlling for all firm-constant variables, including industry. The
> same is true for all other firm-constant variables, like your other
> variable whether or not the firm was listed.
>
> Things will obviously get more complicated when you are substantively
> interested in these effects.
>
> Hope this helps,
> Maarten
>
> --------------------------
> Maarten L. Buis
> Institut fuer Soziologie
> Universitaet Tuebingen
> Wilhelmstrasse 36
> 72074 Tuebingen
> Germany
>
>
> http://www.maartenbuis.nl
> --------------------------
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