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st: An econometric question


From   "Roy,Suryadipta" <[email protected]>
To   [email protected]
Subject   st: An econometric question
Date   Sun, 08 Apr 2007 12:30:02 -0500

Hi,

I have some questions on the interpretation of my results. I have data on (say) 100 countries over a period of 15 years, i.e. a total of 1500 observations. Suppose, I am running a model of the form:
y= a0 + a1x1 + a2x2 + a3x3, where y, x1 and x2 are the mean values of the original variables (say, z, z1 and z2) over 15 years for all countries and x3 is a time-constant variable (say, a region dummy).

Now, when I am running the above regression in the original dataset (with 1500 observations), I am getting significant results for x1, x2 and x3. Of course, all the variables remain unchanged for any country over these 15 years.

On the other hand, if I "collapse" the dataset and run the regression with 100 observations (for 100 countries), none of the variables remain significant and the r-square goes down as well. The mean values for y, x1 and x2 (and x3) are however, the same in both the regressions.

I would greatly appreciate some help if understanding as to why I am not getting the same results as in the first regression.

Thanks!
Suryadipta.
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