Re: st: areg vs xtreg, fe

[David Jacobs <jacobs.184@sociology.osu.edu>]

The main reason for the difference is that AREG counts the machine 
equivalent of the case dummies when it computes the R2; EXTREG, FE 
does not.  It follows that a lion's share of the variance you've 
explained is due to the case specific attributes you've included in 
your models.

Two incidental matters:  First, if you end up using XTREG, FE the 
proper R2 to report is the "within".  Second, R2 square values aren't 
the best measure of anything that matters although referees sometimes 
think they matter .  The point is I wouldn't spend much space in your 
write up on these values.

Dave Jacobs

At 12:22 PM 2/4/2008, you wrote:

> Dear all,
>
> hi I write to ask you one question regarding the difference between 
> areg and xtreg, fe. In particular I would like to understand the 
> difference concerning the r squared. Indeed I use a fixed effects 
> model to estimate the returns to education on a panel of 
> individuals. I performed fixed effects estimates for two categories 
> of workers, blue collars (which are many) and white collars.
> I found out interesting results. However, for blue collars the 
> estimates of the r-squared with xtreg,fe are the following:
> r^2 within 0.07
> r^2 between 0.002
> r^2 overall 0.004
> when I do the same estimation with areg, I obtain an r^2 of 0.80. a 
> huge difference.
>
> I would like to understand why is there a so big difference, and 
> which one I should report...
>
> Another related question concern the estimates for white collars. 
> The xtreg, fe have an overall r^2 of 0.27 (much better than the 
> previous one). However when I try the areg command it says that the 
> matrix is not positive definite (I use also some lagged values of my 
> variable of interests in the estimation).
>
> Could anyone help me?
> many thanks
> jenny
>
>
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