Re: st: Regression with about 5000 (dummy) variables

[John Antonakis <John.Antonakis@unil.ch>]

OK; I did call it a trick, didn't I? :-)

Though, what matters is that the estimator is consistent, and 
computationally efficient.  That is the problem that this estimator can 
address in high-dimensional fixed-effect data. It takes a second to 
estimate something that take hours with dummy variables. So I take back 
the comment on the DFs.

Best,
J.

__________________________________________

Prof. John Antonakis
Faculty of Business and Economics
Department of Organizational Behavior
University of Lausanne
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Associate Editor
The Leadership Quarterly
__________________________________________


On 20.04.2012 15:33, Christopher Baum wrote:
> <>
> On Apr 20, 2012, at 2:33 AM, John wrote:
>
> > The estimator still seems good. Notice, though, that the F-test
> > numerator DFs are only 3.  So that's what I meant when I said we save on
> > DF (as compared to the OLS fixed-effects estimator).
> You're cheating, John, by overlooking that theorem about the absence of a free lunch.
> The number of DF is not 3. When you gave the commands
>
> bys idcode : egen double cl_age_id = mean(age)
> bys south : egen double cl_age_south = mean(age)
>
> you computed a large number of sample means, so the cluster-mean regressors in the Mundlak
> model must be considered as not single DF, but as many DF as it took to compute them,
> following the logic of the FE model.
>
> I could make the same mistake by applying the within transformation to Y and X and
> running OLS, which would have one DF for the one slope estimated. But if I used the
> FE estimator it would properly account for the fact that the within transformation is not
> free, as this is just the LSDV (dummy-variable) model, and putting in all those dummies is not free.
> Neither is this method. Your DF should be adjusted to reflect the creation of those
> cl_* variables.
>
> Kit
>
> Kit Baum   |   Boston College Economics&  DIW Berlin   |   http://ideas.repec.org/e/pba1.html
>                               An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
>    An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html
>
>
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