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Re: st: Re: xtreg vs areg, once again

From   Mark Schaffer <>
Subject   Re: st: Re: xtreg vs areg, once again
Date   Sun, 06 Jun 2004 23:32:47 +0100 (BST)


Quoting Christopher F Baum <>:

> On Jun 4, 2004, at 7:33 AM, Andrea wrote:
> > Thanks for that. However, adding 420 dummies to my model would
> only 
> > work
> > when estimating a pooled OLS, but not a within estimator (since
> the 
> > fixed
> > effects model would drop anything that is invariant over time).
> > Any hints for doing that in fixed effects?
> A one-way individual fixed effects model drops any variable that is
> constant for an individual, such as gender or race. As in previous
> post, it makes no difference algrebraically whether you estimate
> this 
> model with the within transformation or by explicit dummy variables.
> The rank of X'X will be the same any way you do it. You cannot
> include 
> time-invariant variables in an individual FE model.
> Kit

Kit is right, but it's perhaps worth noting that you can include such 
variables in a random effects model.


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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008


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