st: Random effects and pooled models

["Elena Giarda" <elena.giarda@prometeia.it>]

Hi,

I have panel data on individual wages and I'm trying to estimate age 
profiles taking into account birth cohorts (9 of them).

I ran the following regression and obtained significant coefficients on all 
variables:

reg ln_wage age age_squared  control_variables  cohort_dummies, robust

Then I wanted to check whether a random effects model was appropriate and 
therefore run:

iis cohort
xtreg ln_wage age age_squared  control_variables, re

but in the output I obtained:

Random-effects GLS regression                   Number of obs      = 
411913
Group variable (i): cohort                      Number of groups   = 
9

R-sq:  within  = 0.4447                         Obs per group: min = 
17118
      between = 0.9953                                        avg = 
45768.1
      overall = 0.5088                                        max = 
66702

Random effects u_i ~ Gaussian                   Wald chi2(14)      = 
426627.54
corr(u_i, X)       = 0 (assumed)                Prob > chi2        = 
0.0000

sigma_u  =  0
sigma_e =  0.30766012
rho = 0   (fraction of variance due to u_i)

What does rho=0 mean exactly? That there are no cohort effects? I made a 
check and found out that I got the same results of running a pooled 
regression:
reg ln_wage age age_squared  control_variables, robust

Can anybody give me hand?

Thanks a lot!
Elena

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