-----Original Message-----
From: Kit Baum, Faculty Micro Resource Center [mailto:[email protected]]
Sent: Tuesday, October 22, 2002 10:57 AM
To: [email protected]
Subject: st: Re: fixed effects and SUR
--On Tuesday, October 22, 2002 2:33 -0400 Jeremy wrote:
>
> Hi Everybody,
>
> Could anybody give me some idea how to estimate SUR with
fixed effects
> using Stata? I'm new to Stata. All I know at this point is
that I could
> use XTREG to estimate a single equation with fixed effects,
and SUREG to
> estimate a system of equations. I've no idea how to proceed
from here.
> For your information, I'm trying to use Stata to "cross-check" some
> estimation results I obtained using TSP. Your answers will
be gratefully
> appreciated.
>
> Jeremy Z.
>
and cb23 responded
>
> Just in case no-one comes up with a correct answer on this,
I would try
> the following :-
>
> I think I am right in saying that the xtreg fixed effects
model is just
> a standard OLS model with dummies for the groups with one
alteration: in
> OLS we choose a baseline dummy for which we set the
coefficient to zero
> and in fixed effects we sum the dummy coefficients on all groups to
> zero. This means that the coefficients on the other Xs
should be the
> same in fixed effects and the dummy variable approach, and the only
> difference will be in the coefficients of the constant and the group
> dummies/effects. You should try this to make sure it
works. You can
> even try to choose the baseline dummy such that the
coefficients on the
> other dummies are close to summing to zero.
>
> Than, having realised we can roughly write a fixed effect model as a
> standard equation, you could then rewrite your fixed effect
equations in
> a dummy variable form and stick them in to a SUR model.
I find this quite confused. Note that if we start with the
most general
(infeasible) model of panel data, in which every i and t has its own
coefficient vector, we can define special cases:
a) all slopes constant over i and t, s^2 constant over i and
t, intercept
varies over i
b) intercept, slopes, and s^2 all have an i subscript, but
are constant
over t
The former case is one-way (individual) fixed effects, aka
LSDV (dummy var)
model, which may be estimated by xtreg, fe or areg. Note that
normalisation
of the intercepts makes no difference here; no matter whether
you include a
constant and (n-1) dummies, or express data as demeaned by
individual, you
will get the same estimates in terms of significance.
The latter case is Zellner SUR, estimable via sureg. This is a 'fixed
effect' model, in that each individual has his/her own
equation (thus N < T
for standard SUR), with his/her own intercept, set of slopes,
and s^2. One
can consider special cases of SUR in which further
constraints are imposed
(e.g. common slopes over units) which, since SUR is a GLS
estimator, takes
you back very close to individual fixed effects (except that
SUR allows for
s^2_i, whereas
IFE imposes a single s^2 on the entire panel).
So I don't know what it means to estimate SUR with fixed
effects; if you're
using SUR, you are already estimating individual fixed
effects, and more.
Kit
--------------------------------------------------------------------
Kit Baum, Faculty Micro Resource Center [email protected]
Academic Technology Services, Boston College http://www.bc.edu/ats
http://fmwww.bc.edu/FMRC/ http://fmwww.bc.edu/GStat/
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