Menale,
Quoting Dawit Lidia <[email protected]>:
> Hi ALL,
> I say Merry Christmas for those who celebrate Christmas.
>
> I have two questions as usual.
>
> 1) Can we use random effect estimation when the some of the coefficients
> of the between and fixed effects estimators differ (xtreg, be and
> xtreg, fe)?
This is what the Hausman test is for. In fact, the Hausman test of (a)
fixed vs. random effects, (b) between vs. random effects, and (c) fixed
effects vs. between, are all the same test. See Baltagi, Econometric
Analysis of Panel Data, chapter 4.
> 2) If hausman specification test rejected the fixed effects model, does
> this mean that all regressors in the model are not correlated with
> unobserved effects? Or is there a possibility for one or two regressor to
> be correlated even if hausman test favour random effect.
The first problem here is that you've got things backwards: in the standard
setup, the fixed effects model is consistent under the null and the
alternative, whereas the random effects model and the between estimator are
consistent under the null only. If the Hausman test says "reject", it means
that the random effects estimator and the between estimator are being
rejected, not the fixed effects estimator.
With respect to your specific question, you can use an artificial-regression
version of the Hausman test for tests of specific regressors. See
Wooldridge, Econometric Analysis of Cross-Section and Panel Data (2002), p. 90.
Hope this helps.
--Mark
> Thanks
> menale
>
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3294
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
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