Panel data can be organized in two primary shapes:
Visualization:
D.income calculates the difference between the current and previous period ( 2. Exploring and Visualizing Panel Data
) , reject Pooled OLS in favor of Fixed Effects. Individual heterogeneity exists. Step 2: Fixed Effects vs. Random Effects (The Hausman Test) The Hausman test evaluates whether the individual errors ( ) are correlated with the regressors. The null hypothesis ( H0cap H sub 0 stata panel data
If you have heteroskedasticity or serial correlation (very common in panel data), you should report Robust Standard Errors.
pwcorr wage hours tenure age
: It subtracts the time-mean of each variable from its values, effectively eliminating the individual fixed effect ( αialpha sub i Panel data can be organized in two primary
This controls for all characteristics of the units (e.g., geography, culture, unobserved ability). It is the most common model in economics.
If p < 0.05, FE is consistent; RE is inconsistent.
In panel data, the error term of one period may be correlated with the next. Step 2: Fixed Effects vs
* 4. Store the estimates estimates store random
When you run xtreg, fe , Stata automatically includes an F-test at the bottom of the output window: