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st: xtpcse and fixed effects

From   "Gerhard Kempkes" <[email protected]>
To   [email protected]
Subject   st: xtpcse and fixed effects
Date   Tue, 26 Sep 2006 23:32:10 +0200

Dear statalister,

I have a question concerning an issue that has been raised before but has
not been answered in statalist (at least I havent found an answer in the
archive): xtpcse and fixed effects.

I have a dataset of max. 10 states and about T=15 years. I want to conduct a FE estimation and have detected serial correlation in the disturbances. I am aware of xtregar, fe, but for three reasons I am interested in a prais-winsten, fe

(1) xtregar, fe causes the loss of one time period and Prais-Winsten does
(2) xtregar does not allow to account for heteroscedasticity but xtpcse does.
(3) I would like to compare results from both estimation techniques.

Stata offers a panel version of prais in xtpcse, but does not offer a FE option.
My question is whether the correct way of estimating a FE prais-winsten estimation is to run xtpcse on the data including dummy variables (or,
alternatively to run xtpcse on deviations from means or orthogonal deviations). After having read XT pcse I do not see any reason against such a procedure but I am not sure because XT pcse is rather silent on implementing FE.

Thank you very much!
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