Re: st: Xtivreg2: Dropping dummy variables due to Collinearity

[Austin Nichols <austinnichols@gmail.com>]

Shonda Naples <liminalzest@gmail.com>:
Dropping an intercept is typically not an option for XT commands, for
obvious reasons.

On Tue, Jun 14, 2011 at 10:56 AM, Shonda Naples <liminalzest@gmail.com> wrote:
> An alternative to what Maarten suggests, you could drop the intercept
> term and retain all the dummies.
>
> On Tue, Jun 14, 2011 at 9:52 AM, Maarten Buis <maartenlbuis@gmail.com> wrote:
>> On Tue, Jun 14, 2011 at 3:27 PM, vikramfinavker wrote:
>>> I am using xtivreg2 and the regression is dropping my dummy variables for
>>> year due to collinerarity. I have 10 year dummy:
>>
>>> In normal regression (reg) it omits yr99 and yr00 saying there is
>>> collinearity but in xtivreg2 it drops yr99 and yr09 saying they are
>>> collinear.
>>>
>>> Could someone please explain me whats wrong here? Is it my data?
>>
>> When a set of variables are perfectly colinear Stata cannot
>> distinguish between them, so it is pretty much random which variables
>> it will exclude. For predictions it won't matter (which is why Stata
>> cannot distinguish between them), but for interpretation of your
>> results it matters a lot. A computer cannot know how you want to
>> interpret your results. So if you don't tell it, the computer must
>> ignore that consideration. So, you must tell Stata how you want to
>> interpret your year dummies. Dummies are (usually, but there are
>> exceptions) comparisons of groups in your case years, so you must tell
>> Stata which year you want to compare with which other year. You
>> typically do so by leaving out one year dummy, which is the reference
>> category (but there are other ways of doing it). All remaining year
>> dummies are comparison with that reference category.
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