Re: st: Binary Variables

[Clive Nicholas <clivelists@googlemail.com>]

Natalie Trapp wrote:

> I have a problem concerning Dummy Variables.
>
> I use a Dummy Variable for 150 regions within the EU27. When I regress the
> model, I use one region as a reference group, but Stata still automatically
> omits four to five more regions. Is it maybe because the regions are too
> similar in their characteristics so that I have to build groups of similar
> regions? Or is there another way how I can do the regression with all
> regions of interest?

Your later post shows that you are using -reg-. But why not use -areg-
with the -absorb()- option? In that option you would insert one,
simple categorical regional variable.

Alternatively, why not fit your model using -xtreg- with the -i()- and
-fe- options? Your regional variable slots into the -i()- option.

The coefficients and standard errors are the same under both
approaches, as you can see at

http://www.stata.com/support/faqs/stat/xtreg.html

but your model R-squared will differ, as explained at

http://www.stata.com/support/faqs/stat/xtr2.html

-- 
Clive Nicholas

[Please DO NOT mail me personally here, but at
<clivenicholas@hotmail.com>. Please respond to contributions I make in
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"My colleagues in the social sciences talk a great deal about
methodology. I prefer to call it style." -- Freeman J. Dyson.
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