I currently trying to run a regression with fixed effects using
probability weights. The data is in a cross section. The unit of
observation is household, and I am running fixed effects at the village
level. Sampling (probability) weights are assigned at the household
level.
When I use the command
xtreg y x [pw=weight_household], fe i(village)
I get an error that says probability weights must be constant within each
village.
Is this a limitation of Stata, or is there an underlying econometric issue
with using household-level probability weights and village-level fixed
effects? If this is simply a Stata issue, is there a way to get around
this restriction using the xtreg command?
I have already constructed village dummy variables and run the regression
including the dummy variables as follows:
xi i.village
reg y x _I* [pw=weight_household]
but I want to make sure that this method (including the fixed effects at
the village-level and the probability weights at the household-level) does
not yield biased or inconsistent estimates. Does anyone have any insight
on this?
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