Dear all,
I have an unbalanced panel dataset with 5 years observations from 2000 firms.
I would like to test whether there is a positive time-trend in one variable (e.g. expense).
I tried the following two ways:
xi: areg expense year, absorb(FirmID) cluster(FirmID)
reg expense year, cluster(FirmID)
Both methods show that the slope (i.e. the coefficient of 'year') is positive and statistically significant. Can I conclude that there is a positive time trend in variable 'expense'?
I understand that it is improper to try to test time trend in a time series of 5 observations, but I am not sure whether 2000 firms can allow me to test the time trend although each firms have no more than 5 observations.
Thanks a lot for your help.
Jun
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