st: Re: Dummy Variable Trap

["Michael Blasnik" <michael.blasnik@verizon.net>]

If your panels are unbalanced, then xtreg may not need to drop any of the 
time dummies because they will not always sum to 1 and so will not be 
perfectly collinear.

Michael Blasnik
michael.blasnik@verizon.net

----- Original Message ----- 
From: "Cordula Stolberg" <c.stolberg@gmx.com>
To: <statalist@hsphsun2.harvard.edu>
Sent: Tuesday, June 07, 2005 9:25 AM
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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