Re: st: Logit Model- Controlling for Differences Across Groups (Countries)

[David Hoaglin <dchoaglin@gmail.com>]

Michael,

Your (four) country dummies are constant within country, and so is
each of your macro variables.  As a result, the country dummies,
together with the constant term, can account perfectly for the
variation in any one of the macro variables.

You could run the logit model and plot the coefficients of the country
dummies and the constant (i.e., the reference country) against each of
the macro variables.  If you find a strong systematic relation for a
particular macro variable, you could consider using it in your logit
model instead of the country dummies.  You did not say how many macro
variables you are considering, but you have only 5 countries, so those
plots will have only 5 points.  Because of the sizable within-country
sample sizes, you may be able to consider using more than one macro
variable instead of the country dummies.  Of course, if you have 5
macro variables, and they are not collinear, they would capture all of
the variation between countries, without necessarily adjusting for
real effects.

The country dummies (with the constant) will account for all observed
variation among the countries, whether related to the macro variables
or not.

I hope this discussion helps.

David Hoaglin

> I am running a binary-response logit model, using 2010 survey data
> which includes roughly 2000 respondents from 5 different countries. I
> have two questions:
>
> -I want to control for variations across the 5 countries and capture
> country-specific effects. What is the best way to do this? Should I
> simply include country dummies for 4 of the 5 countries?
>
> -I also have some 'macro' data (e.g. gdp per capita) which is unique
> between the countries but of course does not vary within them. I
> believe it's useful to include these variables. If I want to include
> the country dummies as well, STATA throws out my macro data due to
> collinearity. What is the best way to proceed?

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