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fixed effects [was: Re: st: Date: Sat, 20 Feb 2010 12:03:30 -0600]

From   Maarten buis <>
Subject   fixed effects [was: Re: st: Date: Sat, 20 Feb 2010 12:03:30 -0600]
Date   Sun, 21 Feb 2010 17:47:42 -0800 (PST)

--- On Sun, 21/2/10, Daniel Engster wrote:
> In panel data with slowing changing
> independent variables, is OLS regression with cluster
> analysis more sensitive to the small changes among variables
> than OLS with fixed effects? Fixed effects seem to soak up
> most of the explanatory power of slowly changing variables.

The strength and the weakness of fixed effects is that fixed
effects uses for calculating the effects only the information
obtained from comparing within an individual over time. This
way you are more likely to compare like with like (it is the
same individual only measured at different points in time).
However you are throwing away all the information you could
obtain by comparing different individuals with one another.
This is the information that your OLS also uses.

Hope this helps,

Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen


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