Not to defend mis-specifying equations as a general strategy, but the issue
of losing degrees of freedom is possibly more serious than implied by some
of the responses to Alice's question. The loss of degrees of freedom has a
direct effect on the precision of the parameter estimates.
To turn the (rhetorical?) question around, if your estimates are unbiased
but completely unreliable, what have you gained? Remember, Alice was
talking about small samples.
One should consider both bias and precision (and their implications for the
job at hand) when making such decisions.
-----Original Message-----
From: [email protected]
[mailto:[email protected]]On Behalf Of David
Greenberg
Sent: Monday, July 25, 2005 5:51 PM
To: [email protected]
Subject: Re: st: time dummy in random-effects model
It does use up degrees of freedom. But if you save on degrees of
freedom, and end up with spurious results, what have you gained? David
Greenberg, Sociology Department, New York University.
----- Original Message -----
From: ALICE DOBSON <[email protected]>
Date: Sunday, July 24, 2005 8:35 am
Subject: Re: st: time dummy in random-effects model
> But, in case of small samples does it not use up some degrees of
> freedom?Alice
>
>
> >From: David Greenberg <[email protected]>
> >Reply-To: [email protected]
> >To: [email protected]
> >Subject: Re: st: time dummy in random-effects model
> >Date: Wed, 13 Jul 2005 16:53:04 -0400
> >
> >The purpose of the time dummies is to take into account effects
> that may
> >influence all cases in a given year to the same amount. If you think
> >they are likely to exist, then it would be wise to put them in.
> This can
> >help to eliminate a possible source of spuriousness due to common
> trends>in observed variables. David Greenberg, Sociology
> Department, New York
> >University
> >
> >----- Original Message -----
> >From: Seok-Woo Kwon <[email protected]>
> >Date: Wednesday, July 13, 2005 4:39 pm
> >Subject: st: time dummy in random-effects model
> >
> > > Dear Statalist,
> > >
> > > In a running random-effects model for panel data, I have yearly
> > > observationsand add a time dummy for each year. However, I noticed
> > > that some people do
> > > not put in the time dummy at all in the model. Is this justified?
> > >
> > > Thanks.
> > >
> > > Seok-Woo
> > >
> > > *
> > > *
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