a hausman test (see hausman) can be used since OLS is efficient if the fixed effects are zero but biased if they are not and FE logit is consistent in either case. However, be aware that the FE logit model is only run on observations that have a change in the outcome variable over the panel dimension. You will want to the run the simple logit on just this sub-sample for the hausman test.
the approach you propose will not give you a correct results because unless you have more observations in the panel dimension (ie year) than number of panels (ie individuals) just adding dummy variables will result in biased estimates because of the incidental parameters problem.
-----Original Message-----
From: [email protected]
[mailto:[email protected]]On Behalf Of Ali Karim
Sent: Friday, November 18, 2005 12:44 PM
To: [email protected]
Subject: st: fixed effect logit vs naive logit
Dear subscribers:
I was wondering if there is any way I can test whether the fixed-effects logit model is a better fit than the na�ve logit model.
for example:
xtlogit outcome age sex race,i(id) fe
vs.
logit outcome age sex race
The only way I figured to do this is to run a logit model with dummies for id, then run the test for all the dummies jointly equals zero.
Thanks in advance.
Ali
Ali Mehryar Karim
Senior Quantitative Analyst
DELIVER/John Snow, Inc. (JSI)
1616 N Fort Myer Dr, 11th Floor
Arlington, VA 22209
ph: 703-528-7474; fx: 703-528-7480
visit the DELIVER website: deliver.jsi.com
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