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st: Dummy variables for pooled regressions


From   "Yvonne Capstick" <yvonnecapstick@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Dummy variables for pooled regressions
Date   Wed, 11 Jan 2006 00:17:02 -0500

Hi,

I'm trying to run a regression of company profit on many potential determinants (e.g. past advertising, past sales growth). I have a large dataset of many companies and am doing a pooled regression, pooling all of the observations together. I would like to include two dummy variables as controls: one for the state, and a second for the industry (i.e. state and industry year fixed effects).

Is there a simple way to do this without literally creating a separate dummy variable for each state and each industry? I know that with a panel dataset (i.e. multiple cross sections over time), I can do xtreg y x, i(industry) fe if I am only interested in constructing an industry fixed effect. This syntax instructs Stata to create the dummy variables so I do not have to.

However, if I need more than one fixed effect (industry and state), xtreg cannot seem to accommodate this. It only lets me put one variable in the i( ) option. Could anyone suggest an alternative way?

Thanks!
Yvonne

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