--- Asgar Khademvatani wrote to me privately:
> You meant, if I have 4 industry in my panel data set, then a two-way
> FE can be implemented as:
>
> xtreg Y X d1 d2 d3, fe where d1 d2 d3 are industry dummies and
> -xtreg- take cares of time periods? If so, Do not you think this is a
> double accounting for a one-way fixed effects without taking care of
> time periods? Please advise
First of all, it is better not to respond of list. This is discussed in
section 5 of the Statalist FAQ:
http://www.stata.com/support/faqs/res/statalist.html
There are two ways of thinking about what you want: either you want to
control for industry and period, or you want to control for industry,
period, and the interaction between industry and period. Which one you
want is a subtantive choice and can only be made by the researcher.
What I proposed is the first option, and that boils down to the
pseudo-code you have given above (assuming you -xtset- on period
first). For the alternative you create a new id variable that is the
combination of period and time, and use that in xtreg. In pseudo-code:
egen id = group(period industry)
xtset id
xtreg Y X, fe
Hope this helps,
Maarten
-----------------------------------------
Maarten L. Buis
Department of Social Research Methodology
Vrije Universiteit Amsterdam
Boelelaan 1081
1081 HV Amsterdam
The Netherlands
visiting address:
Buitenveldertselaan 3 (Metropolitan), room Z434
+31 20 5986715
http://home.fsw.vu.nl/m.buis/
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