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st: xtabond and dropped dummy variables


From   Jason Hecht <jhecht58@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: xtabond and dropped dummy variables
Date   Tue, 5 Jun 2012 11:44:49 -0400

I created a set of time dummy variables using the Data\Create or
change data\  etc.  STATA function (i.e., "quietly tabulate year" etc.
command).  That is, when I originally created my panel dataset, I had
a variable called "year" which simply repeated the year in each
firm-specific panel (i.e., 1998-2008).  So I was able to generate a
time dummy for each year using the aformentioned STATA Data menu.

Now the problem is that when I include, say, dum1998 by itself  (or
with any other time dummy) in the xtabond model, they always get
dropped with the error messages:

note: dum1998 dropped from div() because of collinearity
note: dum1998 dropped because of collinearity

The same messages get generated when I also include a Dow Jones sector
dummy variable.

Can anyone recommend a relatively easy solution?

Thanks so much for your time.

Jason Hecht
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