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st: RE: xtivreg2
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
st: RE: xtivreg2
Tue, 3 Jul 2012 00:37:51 +0100
> -----Original Message-----
> From: firstname.lastname@example.org
> [mailto:email@example.com] On Behalf Of Ikuho Kochi
> Sent: 02 July 2012 21:58
> To: firstname.lastname@example.org
> Subject: st: xtivreg2
> Dear fellow econometricians/statisticians
> I have a question regarding the "xtivreg2" command and would
> appreciate very much if somebody can help me to clarify some issues.
> Since I have to estimate HAC fixed models, I am using the
> xtivreg2 command.
> However, the xtivreg2 command does not estimate a constant
> term in the fixed effect model (as described in the command
> description), and I am wondering why it is programmed in this
> way. My understanding is that the fixed effect model usually
> includes a constant term
Actually, that's not the case. Strictly speaking, a fixed effects model
cannot provide an estimate of the constant term. The reason is that a
"pure" fixed effects model uses *only* within variation to obtain
estimates of the coefficients. It can't provide estimates of
coefficients on anything that does not vary within panels, and that
includes the constant term.
> (when I run the same model with
> xtivreg command, the constant term appears, so it is not the
> data problem),
This is because official -xtivreg-, and for that matter official
-xtreg-, use cross-sectional variation to obtain estimates of the
constant term. Rather than go into the gory details, I'll just say
"it's in the manual". Which it is.
Personally, I always found it odd that these commands will report an
estimated constant term that relies on cross-sectional variation even
when the -fe- option is specified. This is non-standard in econometrics
(my home territory), but maybe it's standard in other areas - I don't
know. But I'm the author of -xtivreg2-, and I programmed it to behave
more in accord with the conventions in my own field of work.
> or am I missing something? I wonder if the
> user of this command is expected to include an extra variable
> with constant values in the fixed effect model so that the
> constant term will be estimated in fixed model estimation?
> I appreciate for your time and input...
> Ikuho Kochi
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