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st: regression methodology

From   Dirk Nachbar <[email protected]>
To   statalist <[email protected]>
Subject   st: regression methodology
Date   21 Oct 2005 14:40:28 +0100
Dear all

there are two ways to deal with heterogeneity in your data set

1. you include a dummy for a sub-group

2. you run several regressions for each sub-group

Now I was thinking when do we choose one or the other . It seems that if we do not want the same explanatory variables for each sub-group we should use approach 2, but then maybe our sample becomes too small. Approach 1 seems more neat and is quicker.

What do you think? Which approach is better and how should we determine when to use which approach?

Dirk Nachbar

Assistant Economist

Pensim2

Department for Work and Pensions

Level 4, The Adelphi

1-11 John Adam St

WC2N 6HT London

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