Re: st: How do I test whether the time path of income differs between two groups?

[Maarten buis <maartenbuis@yahoo.co.uk>]

--- On Mon, 29/11/10, andreas nordset wrote:
> So I am regressing income on a set of "relative year"
> dummies to capture how it develops around an event.
> Furthermore, I would like to estimate two separate time
> paths for two separate groups, so I run:
> - reg inc (ry_m2 ry ry_m1 ry_0 ry_p1 ry_p2) (iry_m2 iry
> iry_m1 iry_0 iry_p1 iry_p2) -
> where the second set of dummies is the first one interacted
> with the dummy for membership of the second group.
<snip>
> Now here's the question: How do I appropriately test
> whether the time paths of the two groups are significantly
> different? I suppose that in any specific relative year
> they are if the two confidence intervals do not overlap,
> but how can I do a joint test for all relative
> years?

No, looking whether confidence intervals overlap is not a
test of the hypothesis that the coeficients are equal. That 
way you are ignoring the covariance in the sampling 
distribution of both estimates. 

Instead I would estimate all in one model with interaction
terms, and than test whether all interaction terms are 
equal to 0. This is probably easiest using Stata's factor
variable notation:

*---------------------- begin example ---------------------
sysuse auto, clear
recode rep78 1/2=3

// estimate the model with interaction terms
reg price i.rep78##i.foreign

// see how Stata stores the coeficients
reg, coefl

test  _b[4.rep78#1.foreign] = _b[5.rep78#1.foreign] = 0
*----------------- end example ---------------------------

Hope this helps,
Maarten

--------------------------
Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen
Germany

http://www.maartenbuis.nl
--------------------------


      

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