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Re: st: Multicollinearity in a fixed effects model


From   "Fitzgerald, James" <J.Fitzgerald2@ucc.ie>
To   "<statalist@hsphsun2.harvard.edu>" <statalist@hsphsun2.harvard.edu>
Subject   Re: st: Multicollinearity in a fixed effects model
Date   Wed, 8 Aug 2012 08:16:13 +0000

Thanks Maarten

On 8 Aug 2012, at 08:38, "Maarten Buis" <maartenlbuis@gmail.com> wrote:

> On Wed, Aug 8, 2012 at 7:32 AM, Fitzgerald, James wrote:
>> My question is, can I "ignore" the effects of multicollinearity given my sample size and the fact that no variables are dropped?
> 
> Multicollinearity is not a problem, it is just the phenomenon that you
> loose statistical power when two or more
> explanatory/right-hand-side/independent/x variables are hard to
> distinguish from one another. This is trivially so, and there is
> nothing you need to do as statistical techniques tend to do the right
> thing automatically; that is, the standard error will correctly
> increase as the degree of multicollinearity increases. So there is
> nothing to check.
> 
> -- Maarten
> 
> ---------------------------------
> Maarten L. Buis
> WZB
> Reichpietschufer 50
> 10785 Berlin
> Germany
> 
> http://www.maartenbuis.nl
> ---------------------------------
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