Re: st: Explanatories that vary only over time in panel data

[Aljar Meesters <aljar.meesters@gmail.com>]

Estimating a panel regression model where variable(s) do not vary over
individuals is possible, as long as they vary over time. The same
holds for adding a time trend to your model. Of course, the
variable(s) that you want to add should not be collinear with the time
trend.
I do not completely understand what you mean with: "If we just repeat
the price entries for all i districts in our input data we assume that
Stata will think that there are in fact multiple observations. So the
standard errors can not be correct.".
You have these multiple observations per district, so, why should the
standard errors not be correct? Maybe what worries you is your
assumption that all prices are equal between all districts. I do not
know if such an assumption is justified. You can take the average Y
over districts and regress Y_t = a + b*X_t + c*t instead.
Best,

Aljar

2013/1/30 ARDE DE <wsbbarde@gmail.com>:
> Dear All:
>
> Our question is about both, the theory of panel data analysis and
> (later on) its implementation in Stata.
>
> The model we have in mind is:
> Y_it = a_i + b*X_it + c*t + u_it,
> i.e. the standard FE/RE framework but with a linear time trend.
> One of our explanatory variables in X_it does not vary across
> individuals, it only varies across time (it is a price variable that
> is assumed to be the same across all districts i within the country we
> consider).
> How do we tell Stata about this?
> If we just repeat the price entries for all i districts in our input
> data we assume that Stata will think that there are in fact multiple
> observations. So the standard errors can not be correct.
> The same question applies to our linear time trend c*t. Can we just
> include the "year" variable repeatedly (although it does not vary
> across the index i)?
>
> We were not able to find an answer in Wooldridge (2001): Econometric
> Analysis of Cross Section and Panel Data, nor in Matyas et al. (2008):
> The Econometrics of Panel Data, 3rd ed.
>
> Has someone used a similar model?
> Any help/hints will be highly appreciated
>
> Arde
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