Thursday, March 09, 2006

st: Partial Relation in Fixed Effects Estimation

I really appreciate the help people provide on this board.

I'm running fixed-effects regressions to estimate the impact of var1 on growth using the following command.

tsset id year

xtreg growth var1 var2 , fe

var1 turns out to have significant impact on growth in this specification.

I'm interested in generating a scatter plot of growth and var1 conditional on control variable var2 and the fixed effects (id dummies). I would like to visually inspect this relationship to see which observations are driving the results. That is, I want to identify the within-id variation that's giving me the fixed effect results.

To do this I've done this:

xtreg growth var2, fe predict growthres, e

xtreg var1, fe predict var1res, e

reg growthres var1res twoway scatter growthres var1res

I was hoping to obtain the residual growth conditional on var2 and the id effects and obtain the residual of var1 conditional only on the id effects. Then I wanted to plot the residuals to see which observations were important for the results.

But when I run the regression of growthres on var1res, I get no significant results and the scatter plot is basically a cloud. This doesn't seem consistent with the initial result from running the regression (at the top).

Would anyone know of a way to do something like this to identify the within-id variation that's giving me the results?

Thanks very much for your help.

Jason * * For searches and help try: * * *


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