Tuesday, March 07, 2006

st: rsquared in xtreg

Nina wrote

I had the same problem as Ahmed (in 2003...) and your answer was extremly helpfull. Just one question remains: I want to refer to the fact that "In the -xtreg, fe- calculation, we are washing out the explanatory effects of the intercepts" in my paper, but actually I would prefer to have a reference for that. Do you or does somebody know whom I can cite?

Any econometrics book that covers fixed effects. The 'within estimator' gives each individual in the panel his/her own intercept term (such that the sum of the residuals is zero for each individual, rather than only for the entire sample). A regressor subject to the within transformation has variance only to the extent that it varies over time for that individual; likewise for the response variable. Thus intuitively you are ignoring the fact that individuals' average values of Y and X matter, and only focusing on variation within their time series.

Kit Baum, Boston College Economics http://ideas.repec.org/e/pba1.html * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/


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