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st: RE: Dummy Variable Trap

From   "Scott Merryman" <[email protected]>
To   <[email protected]>
Subject   st: RE: Dummy Variable Trap
Date   Tue, 7 Jun 2005 17:33:26 -0500

Are you sure it didn't drop a dummy variable?

In -reg- if you have full set of dummies and a constant it will report the
dropped dummy variable in the table of estimated coefficients, something

webuse grunfeld,clear

tab time, gen(D)
reg inve mval D*

mvalue |   .1398271   .0059889    23.35   0.000     .1280092     .151645
    D1 |  (dropped)
    D2 |  -23.16908   49.15807    -0.47   0.638     -120.173     73.8348

However, in -xtreg- it will report the dropped variable at the top of the

. xtreg inve mval D*, re
note: D5 dropped due to collinearity


> -----Original Message-----
> From: [email protected] [mailto:owner-
> [email protected]] On Behalf Of Cordula Stolberg
> Sent: Tuesday, June 07, 2005 8:26 AM
> To: [email protected]
> Subject: st: Dummy Variable Trap
> Hello All,
> I have a panel regression, which I first run as a random effects
> regression
> and then as pooled OLS. I have yearly observations and add a time dummy
> for
> each year (the time dummies are also used for an interaction term with
> another independent variable). I know that to avoid the dummy variable
> trap,
> I should drop one of the dummies. I also know that Stata otherwise drops
> one
> of the time dummies. Now I have estimated the random effects regression
> and
> the pooled OLS regression and kept (by mistake) all of the time dummies.
> However, instead of dropping one of the dummies, Stata kept all and
> delivered results. What am I missing here?
> Thanks,
> Cordula

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