The is somewhat related to a recent discussion and is more of a
statistical question than a Stata question. Any assistance would be most
appreciated.
I have panel data from 1986-2003. Logic and examining the data suggest
that the dependent variable increased monotonically over time. Because I
have some time-invariant variables, I am using random-effects (Hausman
test indicates this is okay). What are the relative merits of either:
a. Including a YEAR variable, which will range from 1985 to 2003 in
value, or
b. Including 7 dummies, one for each year (except the omitted year)
Possibly complicating the issue (or not), I have two dummy variables,
one of which is set to one for all observations after 1994 and the other
set to one after 1998. I have 47 observations per year, so degrees of
freedom are not critical.
I have found little guidance in my standard texts. Thank you for any
guidance &/or references.
Glenn
Glenn Hoetker
Assistant Professor of Strategy
College of Business
University of Illinois at Urbana-Champaign
217-265-4081
[email protected]
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