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st: Fixed-effects estimation with 3000 dummy variables

From   Joachim Wagner <[email protected]>
To   [email protected]
Subject   st: Fixed-effects estimation with 3000 dummy variables
Date   Fri, 08 Sep 2006 14:54:09 +0200

Dear All:

I have to estimate a model with a very large number of dummy variables (interaction terms made from some 260 industry dummy variables and 11 year dummy variables) where I want to control for establishment level fixed-effects, too. I generated the dummy variables, and using pooled data without fixed effects, all this is easily done by using AREG and absorbing the 3000 dummy variables. Unfortunately, to the best of my knowledge there is no such program as "XTAREG". I transformed my data by subtracting the mean values within the industry-year cell, and using these data in a simple OLS estimation without a constant gives the same results as the models using AREG (as it should).

Question: Is it correct to use XTREG with these de-meaned data, and the option FE, to estimate the fixed effects version of the model? Am I missing something obvious?

(As an aside, I know that I could use XI:XTREG here, but the do-files will run for many days, and the runs have to be done inside the Statistical Office for privacy reasons, and the PC is not allowed to run over the weekend ...)

Best, Joachim

Prof. Dr. Joachim Wagner
University of Lueneburg
Institute of Economics
PO Box 2440
D-21314 Lueneburg

Phone: +49-4131-677-2330
Fax: +49-4131-677-2026

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