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st: Re: -areg- question

From   Kit Baum <[email protected]>
To   [email protected]
Subject   st: Re: -areg- question
Date   Fri, 18 Sep 2009 09:09:07 -0400

This is misguided. If you have a dataset of children, identified also by their mothers, a family with one child will have one value of 1 and N-1 values of 0 in that mother's dummy variable. That variable still has variance over the N observations, so it will not be dropped from the regression. However that OBSERVATION is essentially dropped from the regression. The FE estimator allows each unit (mother) to have her own constant term, and when she only has one observation, that means that the value of that mother's coefficient will be chosen to make that observation's residual precisely zero. What that means is that if you drop all single-child families, you will change the number of observations, but those observations are not contributing to the explanatory power of the model anyway. However, changing N will affect small-sample standard errors, t statistics, etc. This is the problem of 'singleton dummies'.

Conceptually there is no meaningful difference between running a regression with one dummy per mother (regardless of number of children) with -regress-, using -areg- to absorb the mother_id variable, or xtsetting the data by mother_id and running -xtreg, fe-.


On Sep 18, 2009, at 2:33 AM, Sue wrote:

fixed effects using the variable "mother_rc", there are
obervations(children) with only one count per mother_rc, that is
mothers with only one child. Once I include the mother fixed effects,
those with only one child should be dropped from the regression since
with only one child, there is no variation within the mother.

Kit Baum   |   Boston College Economics & DIW Berlin   |
An Introduction to Stata Programming |
   An Introduction to Modern Econometrics Using Stata  |

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