st: Hausman test and interaction

["Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>]

Dear Statalisters:

I received the following email from Niels Botterill ( botterill87 at
hotmail.com ).  He wanted to post this to the list, tried to s*bscr*b*
but failed for technical reasons beyond his control.  If anyone has any
advice I am sure he would be grateful to hear about it on the list.

--Mark

NB: If you are wondering about the "s*bscr*b*" ... I tried several times
to post this to Statalist, and the list server complained about the
content.  If this attempt gets through, I will know what the list server
didn't like.

<snip>

I have have specified a RE model (data are 35.000 respondents in 20
countries), which did not get rejected by the Hausman test. That was
good news, but when I include a cross-level interaction term between an
individual level variable and a country level variable that were both
allready in the model with main effects, the hausman test rejects my
RE-model. I don't really get how this is possible, but I havent been
able to find much on testing the RE-specification, when having
cross-level interaction terms included. Is the test still valid, and if
not what can be done instead?

Also, I have been wondering how it's possible to have valid RE-model,
that get's invalid (due to the hausman test), when I include more
country-level variables. How can my individual level variables be
unbiased, when a variable is omitted, but become biased, when it is
included?



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