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st: Multicollinearity/VIF using -xtlogit,re- models


From   Andreas Schiffelholz <Andreas.Schiffelholz@gmx.de>
To   statalist@hsphsun2.harvard.edu
Subject   st: Multicollinearity/VIF using -xtlogit,re- models
Date   Wed, 01 May 2013 14:27:23 +0200

Hello everyone,

I'm working with an unbalanced panel dataset (t: 10 years, x: 170 companies) calculating -xtlogit- regressions with random effects including "normal" (company age, sales growth, ...) as well as dummy variables (fiscal year, industry). Now I want to check these models for multicollinearity. I want to calculate the VIFs using the -collin- command. Is there anything I need to consider because I'm working with a panel model or is there no difference between the VIFs of a standard -logit- and an -xtlogit, re- random effects model?

There is one specific source of multicollinearity I'm curious about: I'm using a company age (in years) variable as well as dummies for the different fiscal years. The VIFs calculated for "company age" do not indicate any problems with multicollinearity and I receive significant results for the "company age" variable in my -xtlogit,re- model. On the other hand as far as I understand the within variance of the "company age" variables should be explained perfectly by the fiscal year dummies. Do I have to change the "company age" variable and what would be the best way to do so? Is there a specific standard what kind of variable to use? (e.g. variable "company age in 2002" or "company age when entering the sample")

thanks a lot in advance.
Andreas Schiffelholz



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