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st: rsquared in xtreg
I had the same problem as Ahmed (in 2003...) and your answer was extremly
helpfull. Just one question remains: I want to refer to the fact that "In
the -xtreg, fe- calculation, we are washing out the explanatory effects of
the intercepts" in my paper, but actually I would prefer to have a reference
for that. Do you or does somebody know whom I can cite?
Any econometrics book that covers fixed effects. The 'within estimator' gives each individual in the panel his/her own intercept term (such that the sum of the residuals is zero for each individual, rather than only for the entire sample). A regressor subject to the within transformation has variance only to the extent that it varies over time for that individual; likewise for the response variable. Thus intuitively you are ignoring the fact that individuals' average values of Y and X matter, and only focusing on variation within their time series.
Kit Baum, Boston College Economics
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