Dear Statalisters,
I have an unbalanced panel with only a total of 80 observations (over 8
years). The problem for me is to find the right specification for the
regression. I have tried to use a semi-log model, as my variables contain
negative values and I would lose even more observations with a log-log
model.
The semi-log model however fails the -ovtest- and then only works when I
include a lag of the dependent variable. When then using the -xtabond2-
command, I'm running into all sorts of problem, because I always get the
warning that the instruments are large in relation to the number of
observations. In addition, I can't really perform a test for endogeneity for
two potentially endogenous regressors (because of the problems caused by the
few observations).
I have then tried to use the log-log model despite the loss of observations.
The model works well, even without using the lag of the dependent variable.
However, I'm then down to only 36 observations.
My question is therefore whether anyone could tell me how to get a log-log
model without losing so many observations. I have read somewhere on the
Internet that one could add a constant number to all variables such that the
biggest negative number is 1. In an earlier posting on the list someone
suggested to add a positive number only to the variable containing negative
values & then to log it. However, I'm not sure whether this distorts the
relation between the variables.
Sorry for the long mail. Any suggestions would be most welcomed.
Thanks,
Cordula
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