Re: st: Post again: questions on difference models

[Jeph Herrin <junk@spandrel.net>]

You may want to post this to a statistics list, this is a list
concerning the use of Stata.

cheers,
Jeph

Carol Bao wrote:
> Hi, there,
>
> I am running a first differencing model and have two
> estimation questions:
>
> 1. For a dichotomous dummy variable, the difference
> can be -1, 0 and 1.  Instead of using this directly as
> a regressor, is it econometrically correct to generate
> three new dummy variables respectively for the three
> categorized difference and use them as regressors
> instead:
>
> eg. instead of: \delta Y = \beta \delta X,
> estimate: \delta Y = \beta1 Z2 + \beta2 Z3, where Z2=1
> if \delta X==0 and Z3=1 if \delta X==1 (default is if
> \delta X=-1).
>
> If yes, is there any paper or book chapter that can be
> referred to?
>
> 2. Dealing with age and year dummies.  Since the
> difference age is the same for all persons, it seems
> meaningless to use (\delta age) as a regress (or does
> it?) Is it correct to use individual age dummies to
> control for cohort effects? Also, should year dummies
> be included as well? Is there any paper or book
> chapter that can be referred to in this regard?
>
> Any information is highly appreciated.  
> Thank you very much in advance,
>
> Carol
>
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