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Re: st: Levpet and Time Dummies.

From   "Brian P. Poi" <>
Subject   Re: st: Levpet and Time Dummies.
Date   Wed, 20 Mar 2013 11:48:13 -0500

On 03/20/2013 10:34 AM, natasha agarwal wrote:

Dear All,

Please accept my apologies for the previous post.

I was attempting to calculate the TFP for a sample of firms for the
period 2001 to 2005 using the levpet command, and wanted to know if
one can use time dummies in the free variable list ?

Please note that levpet is a user written programme available as a
stata module by levinsohn and petrin in their co-authored paper in
2003. Stata Journal article of the
same can be accessed at The same
can be downloaded as ssc install levpet

Your help will be highly appreciated.

Many thanks,


Rather than including time dummies in the model itself, what I would recommend is to fit your production function using -levpet- (without the time dummies) and obtain the estimates of productivity.  Then you can use graphs, descriptive statistics, etc., to see how the productivity evolves over time.  I suspect that if you include time dummies before obtaining the predicted productivity, you will have "swept under the rug" the interesting productivity dynamics these estimators are designed to help explore.

   -- Brian Poi
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