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st: RE: FE OLS with few clusters


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: FE OLS with few clusters
Date   Wed, 5 Jun 2013 10:20:28 +0000

Marc,

You can run an FE estimation, but probably want to use -areg-.  It will give you the same coefficients as -xtreg,fe- but the setup assumes a fixed number of panels (countries in your case) and with the number of observations increasing with the sample size.  From -areg- help:

    areg fits a linear regression absorbing one categorical factor.  areg is designed for datasets
    with many groups, but not a number of groups that increases with the sample size.

BTW, -areg- doesn't require "many groups", so you are OK there.

But in fact, with only 8 panels, you could simply include country dummies by hand and get the same results.  -areg- will report a mean intercept for the sample as a whole, but otherwise there's no particular advantage to using it when you have so few panels.

HTH,
Mark

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of Marc Peters
> Sent: 29 May 2013 21:50
> To: statalist@hsphsun2.harvard.edu
> Subject: st: FE OLS with few clusters
> 
> Dear all,
> 
> 
> I have a dataset with units clustered into countries and want to specify a
> fixed effect regression model. My problem is that the number of countries in
> my dataset is very small (only 8) while the number of observations/country is
> larger (n=40-350), do I have too few clusters to run a FE OLS regression? If so,
> is there some other kind of model I could run?
> 
> Thanks for your help,
> 
> 
> Marc
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