Re: [Gretl-users] panel data's year dummies: a wooldridge textbook's problem
On Sat, 16 Apr 2011, Qi Shi wrote:
Wooldridge's Example 14.4. Using Stata, I can include dummies
d81-d87 into the panel data estimation. But using gretl, the computer
say it encounters exact or nearly colliearity. Why?
This is on the random effects model. The reason is that when gretl
estimates the "within" variance via fixed effects (one piece of
information required for the random effects estimator) it flags an
error if there is exact collinearity. And there is exact
collinearity in this case: that's why Wooldridge omits "exper" in
his fixed effects estimation.
Now maybe gretl is being too conservative here: perhaps we should
just prune the set of regressors to avoid exact collinearity in
estimating the within variance, which I suppose is what Stata
does.
Allin Cottrell