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From | Jed Cohen <jedcohen@vt.edu> |
To | statalist@hsphsun2.harvard.edu |
Subject | Re: st: Fixed Effects Model and Year Dummies |
Date | Fri, 13 Sep 2013 13:05:46 +0200 |
Hi Drew, I would strongy suggest you include year dummies at a minimum, to control for temporal variation in your dependent variable. I don't know what you are modeling, but often a phenomenon varies between years/seasons/months for reasons that are not adequately captured by the explanatory variables in the model. Not including a time fixed effect then leads to ommitted variable bias. you can use xtset panelvar timevar xtreg, fe for this model, though I usually prefer to do this manually with sets of indicator variables, which gives greater control and intuition into the process. Hausman tests can generally be used to compare sets of coefficients, though I think the decision to include time fixed effects should hinge on whether or not you think there is temporal variation that is not due to your set of explanatory variables. Best, JED On Fri, Sep 13, 2013 at 12:11 PM, Drew Reed <drew.reed1@gmail.com> wrote: > Hi, > > I'm running a fixed effects regression on panel data. I am aware of > the fact that fixed effects models control for time invariant > characteristics, like that of country effects, etc. I am wondering, > however, if I should include year dummies in my regression. Are these > dummies time-invariant? Would Stata control for these in using the > xtreg, fe command and are there any tests that can be performed to see > if they should be included? > > Thanks, > > Drew > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/faqs/resources/statalist-faq/ > * http://www.ats.ucla.edu/stat/stata/ -- ---------------------------------------- Jed J. Cohen Graduate Researcher Virginia Tech Dept. of Agricultural and Applied Economics jedcohen@vt.edu * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/faqs/resources/statalist-faq/ * http://www.ats.ucla.edu/stat/stata/