Joana,
Quoting Joana Quina <[email protected]>:
> Thank you Mark. I was told that Hausman and Taylor have an
> Econometrica paper where they tackle the problem of time-invariant
> variables and fixed-effects. Are you familiar with this?
Sounds like xthtaylor, which is implemented in Stata.
> Regarding whether it is acceptable to use random effects, my
> supervisor has a strong view that in this case it would be wrong.
> Could you tell me why you say it is not obviously wrong to do so?
It depends on the application. I would try it and use the Hausman test to
see if it's acceptable - couldn't hurt.
Cheers,
Mark
> Thank you again,
> Joana
>
> On 26/07/05, Mark Schaffer <[email protected]> wrote:
> > Joana,
> >
> > Date sent: Tue, 26 Jul 2005 13:56:55 +0100
> > From: Joana Quina <[email protected]>
> > To: [email protected]
> > Subject: st: Fixed Effects estimation with
> time-invariant variables
> > Send reply to: [email protected]
> >
> > > Fixed Effects estimation with time-invariant variables
> > >
> > > I have a problem and I wonder whether anyone can help. I have a
> panel
> > > dataset of 32 Sub-Saharan African countries and four time
> periods
> > > (N=32, T=4). I am looking at the determinants of aid for these
> > > countries. Given that they are not randomly selected countries,
> I am
> > > using Fixed Effects. However, I have a few time-invariant
> variables
> > > that are important but that get dropped because of using FE. Is
> there
> > > any way of obtaining estimates for these time-invariant
> variables and
> > > still use FE?
> >
> > No. The fixed effects are perfectly collinear with the time-
> > invariant variables. There's nothing you can do about this if
> you
> > want to use fixed effects.
> >
> > > Also, given the data I'm using, is there any
> > > justification for using Random Effects?
> >
> > It's not obviously wrong to try random effects, especially as you
> can
> > use a Hausman test to check whether random effects can be
> accepted.
> > The fact that the time-invariant variables aren't included in the
> FE
> > estimation doesn't prevent you from using the test.
> >
> > Hope this helps.
> >
> > Cheers,
> > Mark
> >
> > > Any comments would be much appreciated.
> > >
> > > Thanks.
> > > Joana
> > >
> > > *
> > > * For searches and help try:
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> > > * http://www.stata.com/support/statalist/faq
> > > * http://www.ats.ucla.edu/stat/stata/
> >
> > Prof. Mark E. Schaffer
> > Director
> > Centre for Economic Reform and Transformation
> > Department of Economics
> > School of Management & Languages
> > Heriot-Watt University, Edinburgh EH14 4AS UK
> > 44-131-451-3494 direct
> > 44-131-451-3296 fax
> > 44-131-451-3485 CERT administrator
> > http://www.sml.hw.ac.uk/cert
> >
> > *
> > * For searches and help try:
> > * http://www.stata.com/support/faqs/res/findit.html
> > * http://www.stata.com/support/statalist/faq
> > * http://www.ats.ucla.edu/stat/stata/
> >
>
> *
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> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
>
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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