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Re: st: How to interpret time dummies in simple difference in difference regression


From   Milena Przheska <[email protected]>
To   [email protected]
Subject   Re: st: How to interpret time dummies in simple difference in difference regression
Date   Mon, 18 Nov 2013 13:43:13 +0100

Here's what I think:

You only need 2 dummy variables:
- one that would indicate whether it is T&T or not, assuming that all
your observations are about the two regions you mention, because if
the dummy variable for T&T is zero, that would automatically mean that
the region is Caribbean
- and another dummy variable indicating whether it is before
discovering resources or after.

The estimates for each dummy variable will indicate the difference
between regions and time period respectively. The interaction between
the two dummy variables would tell you which combination is associated
with higher/lower GDP, and contrast (command -pwcompare- ) as well as
other post-estimation commands available in Stata will help you
understand the results (search -help- for the post-estimation for the
appropriate regression model).

Also, I don't know if you have already consulted this site, but it it
has helped me a lot.

Hope this helps

On Mon, Nov 18, 2013 at 1:24 PM, Melisa Haytasingh
<[email protected]> wrote:
> Hi guys,
>
> I'm doing a regression to analyse the difference between resource-rich
> Trinidad & Tobago and their resource-poor Caribbean neighbour,
> Barbados. I am treating resources (oil and gas) as the endogenous
> variable and regressed GDP on 5 variables: a time trend, dummy taking
> 1 for all observations for T&T before resources (before 1970), dummy
> taking 1 after discovery of resources, dummy taking 1 for obs of
> Barbados before 1970 and dummy taking 1 for obs of Barbados after
> 1970. The regression looks like this in Stata:
>
> -          regression 1:
>
> reg gdp_percapita time TnT_no_resources TnTresources
> barbados_before1970 barbados_after1970, nocons
>
> -          regression 2:
>
> reg inlfation time TnT_no_resources TnTresources barbados_before1970
> barbados_after1970, nocons
>
>
> I am having trouble figuring out how to interpret the results. I think
> I need to find the difference between the coefficients like this:
>  (barbados_before1970 - TnT_no_resources) and (barbados_after1970 -
> TnTresources) and then compare those figures with each other. But I am
> not sure. Also, I am not sure about how to interpret the coefficient
> itself on each of the dummies. I tried to look for similar regressions
> online and I got a better overall understanding but still confused
> about how to interpret. :(
>
>
> Thank you very much for any help.
>
>
> Sincerely,
>
> Melisa
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