Re: st: Inclusion of fixed effects in tobit model for yearly and pooled data

[David Jacobs <jacobs.184@sociology.osu.edu>]

I'm positive that it isn't legal to throw in case dummies to get 
fixed-effects; this technique should ONLY be used to convert OLS 
estimates to their fixed-effects counterparts.  I racall that there's 
a Stata FAQ on this someplace on their web site.

It probably is OK to use year-specific dummies, but I haven't found 
clear confirmation of that from an econometrician.

Dave Jacobs

At 12:37 PM 1/22/2007, you wrote:

> Dear all:
>
> I have a basic question regarding fixed effects modelling (but I 
> can't find an answer in any econometrics textbooks). I am trying to 
> run a tobit model that regresses individual poverty upon a host of 
> individual-level controls as well as the state poverty rate.
>
> I would like to estimate separate models for each year (I have 
> several repeated cross-sections) and for the pooled data, (then 
> estimate the marginal effects), in order to explore the effect of 
> the state poverty variable over time.
>
> In the model for the pooled data, I have added fixed effects for 
> time and for each state. However in the yearly models, I have 
> removed state-level dummies because their inclusion alongside the 
> state poverty rate would induce multicollinearity.
>
> My question is the following: Is it legitimate to run a model on the 
> pooled data using fixed effects (for time and each state), and then 
> to compare the coefficient on the state poverty variable with 
> coefficients derived from cross-sections for specific years 
> (estimated without state dummies, since their inclusion would induce 
> multicollinearity)?
>
> Many thanks in advance.
>
> Regards,
> Brian
>
>
>
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