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st: state trends
sara borelli <firstname.lastname@example.org>
st: state trends
Mon, 18 Oct 2010 22:02:08 +0100 (BST)
I have a couple of questions.
I apologyze in adavance if these are too basic but I am bit confused
I am running a model with state and year fixed effects and I need to add state specific time trends. I created a dummy for each state and interacted it with the variable year, where year=1990,1991,1992,1993...
The trend variables created are: trendstate1 trendstate2 ....trendstate51
I also re-scaled the year variable so that
yearnew =1 if year==1990; =2 if year==1991; =3 if year==1992 and so on.
The trend variables in this case are: trendnewstate1...trendnewstate51
I then regressed:
xi: y x i.year i.state trendstate1-trendstate51
xi: y x i.yearnew i.state trendnewstate1-trendnewstate51
the coefficient of my X variable of interest is the same in both regressions but the coefficient on the state fixed effects are very different. It must be due to the rescaling of the year variable, but I am not sure why.
I then tried to add a quadratic time trend. That is I interacted each state dummy with year2=year*year.
Then I run
xi: y x i.year i.state trendstate1-trendstate51 trendsquarestate1-trendsquarestate51
but stata altogether drops the state fixed effects
However, if I create yearnew2=yearnew*yearnew and quadratic trends based on it and run
xi: y x i.year i.state trendnewstate1-trendnewstate51 trendnewsquarestate1-trendnewsquarestate51
then stata does not drop the state fixed effects and estimates differ
I am not sure what is going on or what I am doing wrong
thanks for any help
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