xtreg will create the dummy variables for countries automatically when you specify the fe option. However, it will not create the time dummies for you. You should do that yourself. David Greenberg, Sociology Department, New York University
----- Original Message -----
From: Sophal Ear <[email protected]>
Date: Monday, May 10, 2004 8:12 am
Subject: st: Fixed-effects and Random-effects Regressions in STATA
> Hello,
>
> I'm trying to run some regressions using pooled data under fixed-
> effectsand random-effects in STATA but am running into some
> difficulty while
> based here in Cambodia.
>
> I have four years' worth of data (1996, 1998, 2000, and 2002) and 167
> countries. The data is now pooled creating a 668 by however many
> variables I have matrix (among them ratings for quality of governance,
> Aid as % of GDP, per capita GDP, human development indicators,
> etc.).
>
> Among these variables are also dummy years:
>
> When data for 1996 is available, the dummy for 1996 says 1, 0
> otherwise.When data for 1998 is available, the dummy for 1998 says
> 1, 0 otherwise.
> When data for 2000 is available, the dummy for 2000 says 1, 0
> otherwise.When data for 2002 is available, the dummy for 2002 says
> 1, 0 otherwise.
>
> I was then instructed to run OLS (which is to say the regress
> command in
> STATA) and include the dummy years (dropping one, otherwise it
> would be
> perfectly collinear) to get a fixed effects model (I guess based on
> year?)... and report my results on the explanatory variables'
> coefficients which interest me.
>
> However, this does not jive with the instructions in STATA regarding
> fixed and random effects models, which mention only the use of xtreg
> (and falls under realm of Generalized Least Squares)... and so I ran
> those as well, but at this point I am not even sure if I should be
> including among my regressors the dummy years per se...
>
> I've also tried Panel Corrected Standard Errors (PCSEs) regression but
> STATA reports too few observations (also, I'm not quite sure if
> this is
> right, but I created a unique numeric ID for each country and set that
> as the panel variable, while using year as the time variable) and got
> the following dead-end:
>
> Number of gaps in sample: 331
> (note: computations for rho restarted at each gap)
> insufficient observations
> r(2001);
>
> Any advice would be much appreciated. Cambodia has few if any
> statisticians/econometricians around, much less STATA experts so this
> listserv is a lifesaver.
>
> Many thanks,
>
> Sophal Ear
>
> PhD Candidate
> UC Berkeley
>
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