> Hi Stata users,
>
> I have a question about the estimator for fixed effects in
> the linear model. That is
>
> . xtreg, fe
>
> I have seen in the XT manual ( version 8, p. 207) that this
> is estimated by running OLS on:
>
> yit -yi(bar) + y (double bar) = ......
>
Alejandro,
The manual is not consistent on this point. See the sentence just under
equation (3) on page 193:
"In particular, xtreg, fe provides what is known as the fixed-effects
estimator ... and amounts to using OLS to perform the estimation of (3)"
Where (3) is:
y_bar(i,t) - y_bar(i) = [y_bar(i,t) - y_bar(i)]b + e(i,t) - e_bar(i)
(no double bars).
My guess is that what is stated on p. 193 is what -xtivreg, fe- really
does, but I haven't checked.
Jean Salvati
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