Some further information on this point
According to Baltagi "Economic Analysis of Panel Data" page 166
"Extracting a balanced panel out of an unbalanced by either maximizing the
number of households observed or the total number of observations in the
balanced panel leads in both cases to an enormous loss in efficiency and is
not recommended"
..."Chowdhury (1991) showed that for the fixed effects error component
model, the within estimator based on the entire unbalanced panel is
efficient relative to any within estimator based on a sub-balanced pattern.
Matyas and Lovrics (1991) performed some Monte Carlo experiments to compare
the loss in efficiency of the within and gls based on the entire incomplete
panel data and complete subpanel. The found the loss in efficiency is
negligible if NT >250, but serious for NT < 150."
Chowdhury, 1991. A comparison of covariance estimators for complete and
incomplete panel data models. "Oxford Bulletin of Economics and Statistics"
53, 88 - 93.
Matyas and Lovrics, 1991. Missing observations and panel data: A Monte Carlo
analysis. "Economics Letters" 32, 39 - 44.
Scott Merryman
----- Original Message -----
From: "David M. Drukker, Stata Corp" <[email protected]>
To: <[email protected]>
Sent: Thursday, July 18, 2002 8:12 AM
Subject: Re: st: Wrong no. of obs. in xtreg fixed effect option
> Ali Mehryar Karim asked why he -xtreg , fe- includes the panels
> with only one observation in calculating the number of observations.
>
> -xtreg ,fe- does not drop the panels with only one observation because
they
> provide information about the constant, the variance components, the
between
> R-sq, the overall R-sq and the correlation between the u_i and xb. In
fact,
> this can be seen from the output that he provided.
>
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