Hello!
Thank you to all who takes the time to answer the questions in this forum, you are doing a great job. This place is a fantastic source of information for newcomers like myself.
So, to my problem. I am currently working on a bachelor thesis and i have gotten my thoughts all tangled up.
I am looking at the effect the change in the marginal tax between 2 years have on individuals number och sick days. I believe the models are fine as they are although i might add or remove a couple of controls. I am trying to get the elasticities out of this with a log log model.
I do not truly understand the fundementals of this type of model.
I am supposed to measure the difference between year 1990 and 1991, yet i have a hard time understanding the output here.
For year 1990 the lnmrtax coefficient is reasonable considering that when marginal tax increases by 10% it is more expensive to work so the sick days increases with 1.5% at that case.
But what i don't understand is how to interpret the coefficient for year 1991. What is good to know here is that a huge tax reform took place in 1991 and that the general marginal tax rates decreased, especially for high income earners.
The FE model. Where inkap = capital income.
Code:
xtreg lnsickdays lnmrtax i.year high_age inkap, fe vce(robust)
Fixed-effects (within) regression Number of obs = 268,541
Group variable: bidnr Number of groups = 139,677
R-sq: Obs per group:
within = 0.0190 min = 1
between = 0.0201 avg = 1.9
overall = 0.0004 max = 2
F(4,139676) = 624.11
corr(u_i, Xb) = -0.0691 Prob > F = 0.0000
(Std. Err. adjusted for 139,677 clusters in bidnr)
------------------------------------------------------------------------------
| Robust
lnsickdays | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lnmrtax | .1533314 .0264629 5.79 0.000 .1014646 .2051983
|
year |
1991 | -.1905544 .0076254 -24.99 0.000 -.2055 -.1756087
|
high_age | .0424174 . 0252012 1.68 0.092 -.0069765 .0918113
inkap | -1.05e-08 1.50e-08 -0.70 0.483 -3.98e-08 1.88e-08
_cons | 1.218533 .1009946 12.07 0.000 1.020586 1.41648
-------------+----------------------------------------------------------------
sigma_u | 1.3147138
sigma_e | 1.1483978
rho | .56721627 (fraction of variance due to u_i)
------------------------------------------------------------------------------
So, to the real question here: Can i consider the coefficient for year1991 to be the value for lnmrtax in 1991 with the same controls? Or is it to be interpreted as lnmrtax + year1991?
As you probably see i struggle to comprehend the basics of this model for comparing the effect over 2 years.
I apologize in advance if this port does not fully meet the standars of Statalist. I have read the FAQ before posting and tried my best.
Any answer will be much appreciated and possibly save me from huge anxiety during the holidays.
I wish you all a great christmas and a happy new year.
Respecfully
Viktor Öberg
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