st: Panel data: large number of linear time trends

[ron alfieri <ron.alfieri18@gmail.com>]

I am trying to estimate a panel data model with a large number of
unit-specific linear time trends (one for each zip code).

I am using the method proposed here:

http://www.stata.com/statalist/archive/2012-02/msg01108.html

Using a subset of my data, I tried using your method and then compared
the results to the results from a model where I include zip-code
specific time trends by adding as covariates an interaction between
the fixed effect for each zip code and a linear time trend.

The results are very similar, but not identical.

This is how I am interpreting the differences. When de-trending the
data for one zip-code at a time your code uses only the data points
from that zip code. However, all data points are used when estimating
zip-code specific trends by adding as covariates the interactions
between the fixed effect for each zip code and a linear trend (with
“all data points” I mean even the data points where these interactions
take the value of zero that are not used when doing it one zip code at
a time).

I would appreciate any comments on whether I am interpreting the
differences between these two methods correctly. If anyone has an
insight on whether one of the methods is more “appropriate” than the
other that would be great.

Aaron

*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/