Monday, September 05, 2005

st: Comparing xtreg, fe and xtgls problem

I get the following error when I run the fixed effects test:

. xtreg profit age size cfreeequi c_freeequi2 munificence4dig, fe

independent variables are collinear with the panel variable orgnr

r(198);

I don't have a similar problem when I run the xtgls and I would like to compare the two.

xtgls profit size age cfreeequi c_freeequi2 munificence4dig, panels(heteroskedastic) corr(psar1) force

Any ideas?

More details....

__________________________________________________________________

I have a difficult panel data set I am working with and wanted to be sure I was headed in the right direction as there are so many assumptions made for different models.

My data includes new business ventures with approximately 70 percent attrition from 1994 to 2002 for my 1994 cohort (unbalanced). My data would also be heteroskedastic and serially correlated. I also would like to test higher order terms as shown by the following model:

Variables (Y) Performance (OIBD), (X) Cash slack, (Z) Munificence

The equation would take the form:

Y = b1X + b2X^2 + b3Z + b4XZ + b5X^2Z + b0

My plan is to use FGLS (xtgls) and then perform a Heckman correction for the unbalanced panel issue. Does this seem like a reasonable approach?

________________________

Steven W. Bradley Doctoral Student Management Department Kelley School of Business Indiana University swb@indiana.edu 812.855.1953 _________________________

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