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Re: st: Re: fixed effects models


From   Jean-Fran´┐Żois Godin<[email protected]>
To   <[email protected]>
Subject   Re: st: Re: fixed effects models
Date   Sun, 19 Oct 2003 23:31:45 -0400

Title: Re: st: Re: fixed effects models

Kit wrote:

"Random-effects models can contain time-invariant variables (but have their own set of issues)."

Does anyone has some references or discussion papers on the “issues” of time-invariant variables in random-effects models?


Jf Godin

Ph.D Candidate


Le 19/10/03 19:08, «?Christopher F Baum?» <[email protected]> a écrit?:

> On Sunday, October 19, 2003, at 02:33 AM, Giorgio wrote:
>
>>
>> 1) I've tried to use xtregar,fe but I had a problem: if I use
>> time-invariant
>> variables I receive this error message
>>         conformability error;
>>         You have issued a matrix command attempting to combine two
>>         matrices that are not conformable, for example, multiplying
>>         a 3x2 matrix by a 3x3 matrix.  You will also get this message
>>         if you attempt an operation that requires a square matrix and
>>         the matrix is not square.
>> When I do not use them I'm able to use xtregar,fe...unfortunately my
>> time-variant variable are really important. Where could the problem be?
>>
> Fixed effects models (with individual effects) cannot contain
> time-invariant variables; it is that simple. Random-effects models can
> contain time-invariant variables (but have their own set of issues).
>
>> 2) without the time-invariant variables I've obtained the values
>> rho_ar  is 0.33224443.
>> the modified Bhargava et al. Durbin-Watson = 1.3479768
>> and the Baltagi-Wu LBI = 1.4145928
>>
>> Unfortunately I'm not able to read this tests. Are they simple DW?
>> Hence,
>> since they are closed to 2, could I assume that there is no first order
>> aoutocorrelation? Could you suggest to me some books or paper to read
>> these
>> tests?
>>
> The tests are not standard D-W. Their motivation, and complete
> references to the underlying econometric literature, are provided in
> the Cross-Sectional Time-Series reference manual (for V8) or the
> Reference Manual (for V7). Sometimes there is no substitute for a
> careful reading of Stata's excellent documentation. I would venture
> that a sizable fraction of the price charged for the software can be
> related to the documentation; good documentation (at the level of a
> fine textbook) is expensive to produce and maintain.
>
>> 3) Given that I've been analysing a Gravity Model, I presume to have
>> "correlation across panel units". Could you suggest to me a test or a
>> procedure to test this type of correlation, given N>T?
>>
> No. You could of course look at the matrix of pairwise correlations of
> each pair of panel units, but I do not know of a test that would allow
> you to combine that (N)(N+1)/2 set of pairwise correlations among
> T-element vectors into a single statistic. That is not to say that it
> may not exist, but I am not aware of it.
>
> Kit
>
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