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AW: st: Industry dummies - inflated standard errors

From   "Seliger Florian" <>
To   "''" <>
Subject   AW: st: Industry dummies - inflated standard errors
Date   Mon, 9 Jul 2012 14:38:57 +0000

Thank you Maarten.

Using factor variables solves the problem.
However, I don't understand why? What is the differenc between using dummy_1-dummy_33 and i.dummy?


-----Ursprüngliche Nachricht-----
Von: [] Im Auftrag von Maarten Buis
Gesendet: Montag, 9. Juli 2012 11:21
Betreff: Re: st: Industry dummies - inflated standard errors

On Mon, Jul 9 2012 at 10:28, Seliger Florian wrote:
>     After entering industry dummies into probit or multinomial logit 
> models  (or other models, I haven't tried...), I sometimes experience 
> the problem that standard errors of the coefficients of the dummies 
> tend to infinity and p-values tend to one.

On Mon, Jul 9, 2012 at 10:42 AM, Stefano Lugo wrote:
> Sometimes those models have an hard time when fixed effects are 
> included; here are a couple of heuristic solution that in my experience might work:
> 1) Try to directly exclude collinear indicators instead of letting 
> stata dropping them

Or better yet, use Stata's factor variable notation, see: -help fvvarlist-.

I would also look for small industries, and combine them with similar industries such that each industry is large enough to get a reliable estimate.

Moreover, I assume you know that adding indicator variables to non-linear models will not result in a fixed effects model.

Hope this helps,

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