Peter,
Date sent: Mon, 21 Oct 2002 16:11:56 +0200
From: "Peter Haan" <[email protected]>
To: [email protected]
Subject: st: robust st. errors and fixed effects
Send reply to: [email protected]
> Hi,
> is there a possibility to estimate a fixed effect model, controlling for
> heterogeneity.
> the comad robust and xtreg don`t work togetehr.
> Is there an other way to control for h.?
> thanks for your help
> peter
Do you mean "heterogeneity" or "heteroskedasticity"? The subject
line of your email suggests the latter.
As was suggested in a posting to Statalist earlier today, you can get
-regress- to estimate a fixed effects model for you, and -regress-
will of course generate robust SEs.
The posting suggested estimating a "least squares dummy variable"
(LSDV) regression, with a dummy for each observational unit
(individual, firm, whatever). This is OK unless you have a lot of
different units, in which case you get more dummy variables than you
can reasonable handle. A slightly more laborious but also equivalent
method is to transform the data by putting it into mean-deviation
form, and then estimating on the transformed data.
There's still the degrees of freedom to correct (the adjustments are
different in panel data models; see Steve Stillman's post on this a
day or two ago). An inconvenience, but not infeasible.
Hope this helps.
--Mark
Note to StataCorp: This is something for the wish list for Stata 8 -
robust covariances for xtreg, areg, xtivreg et al. The cluster()
option would be particularly valuable: cluster(id), where id is also
the identifier used with -iis-, would allow inference using standard
errors that are robust to arbitrary serial correlation.
Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
44-131-451-3008 fax
44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert
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