Dear Stata community,

I'm currently analyzing whether capital controls affect economic development of countries in different ways for different levels of income. To differentiate countries I use the World Bank categorization (low, lower middle, upper middle, high income). I want to capture year specific effects and country effects so I use fixed effects.

The data includes 100 countries and 22 years and looks like this:
Code:
* Example generated by -dataex-. To install: ssc install dataex
clear
input long country2 int year double ka float loggdppc long incgroup_th
1 1995   1 9.137277 2
1 1996 .75 9.160067 2
1 1997   1 9.154971 2
1 1998 .75 9.189805 2
1 1999 .75 9.207232 2
end
label values country2 country2
label def country2 1 "Algeria", modify
label values incgroup_th incomegroup5
label def incomegroup5 2 "Lower Middle Income", modify
I thought of running the regression in two ways: first, by including interaction effects like this:
Code:
xtreg loggdppc c.L.ka##I.incgroup_th I.year, fe
Second, by splitting the sample like this:
Code:
xtreg loggdppc L.ka I.year if incgroup_th==1, fe
xtreg loggdppc L.ka I.year if incgroup_th==2, fe
xtreg loggdppc L.ka I.year if incgroup_th==3, fe
xtreg loggdppc L.ka I.year if incgroup_th==4, fe
However, when I run these regressions I get very different results, which I don't understand. Here are the results of the first regression:
Code:
. xtreg loggdppc c.L.ka##I.incgroup_th I.year, fe

Fixed-effects (within) regression               Number of obs     =      2,094
Group variable: country2                        Number of groups  =        100

R-sq:                                           Obs per group:
     within  = 0.6439                                         min =         17
     between = 0.9173                                         avg =       20.9
     overall = 0.5815                                         max =         21

                                                F(27,1967)        =     131.72
corr(u_i, Xb)  = 0.6650                         Prob > F          =     0.0000

--------------------------------------------------------------------------------------
            loggdppc |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
---------------------+----------------------------------------------------------------
                  ka |
                 L1. |  -.0403811   .0397236    -1.02   0.309     -.118286    .0375237
                     |
         incgroup_th |
Lower Middle Income  |   .1457912   .0257779     5.66   0.000     .0952363     .196346
Upper Middle Income  |   .3751304   .0319848    11.73   0.000     .3124027    .4378582
        High Income  |   .4449389   .0383314    11.61   0.000     .3697644    .5201134
                     |
   incgroup_th#cL.ka |
Lower Middle Income  |   .0749596   .0360304     2.08   0.038     .0042979    .1456214
Upper Middle Income  |  -.0360145   .0431999    -0.83   0.405    -.1207369    .0487079
        High Income  |  -.0693851   .0488317    -1.42   0.156    -.1651525    .0263823
                     |
                year |
               1997  |    .018742   .0167662     1.12   0.264    -.0141394    .0516234
               1998  |    .029583   .0167891     1.76   0.078    -.0033433    .0625093
               1999  |   .0418188    .016792     2.49   0.013     .0088868    .0747507
               2000  |   .0743435   .0167547     4.44   0.000     .0414846    .1072024
               2001  |   .0902911    .016751     5.39   0.000     .0574395    .1231427
               2002  |   .1016007   .0167662     6.06   0.000     .0687192    .1344821
               2003  |   .1296795   .0167714     7.73   0.000      .096788     .162571
               2004  |   .1620865   .0168044     9.65   0.000     .1291302    .1950429
               2005  |   .1879397   .0168483    11.15   0.000     .1548972    .2209821
               2006  |   .2263145   .0168752    13.41   0.000     .1932195    .2594096
               2007  |   .2638747   .0169032    15.61   0.000     .2307246    .2970249
               2008  |    .264955   .0170949    15.50   0.000     .2314291     .298481
               2009  |   .2463653   .0170868    14.42   0.000      .212855    .2798755
               2010  |   .2712964   .0171339    15.83   0.000     .2376938    .3048989
               2011  |   .2974869   .0171138    17.38   0.000     .2639237    .3310501
               2012  |   .3036946   .0172869    17.57   0.000      .269792    .3375973
               2013  |   .3215378   .0173358    18.55   0.000     .2875393    .3555364
               2014  |   .3400188   .0173641    19.58   0.000     .3059649    .3740727
               2015  |   .3602189   .0173665    20.74   0.000     .3261602    .3942775
               2016  |   .3808082    .017317    21.99   0.000     .3468465    .4147699
                     |
               _cons |   8.994969    .030888   291.21   0.000     8.934392    9.055545
---------------------+----------------------------------------------------------------
             sigma_u |  .96225507
             sigma_e |  .11780779
                 rho |  .98523252   (fraction of variance due to u_i)
--------------------------------------------------------------------------------------
F test that all u_i=0: F(99, 1967) = 209.90                  Prob > F = 0.0000
Here are the results of the regression for the low income sample, which is the base group of the previous regression.
Code:
. xtreg loggdppc L.ka I.year if incgroup_th==1, fe

Fixed-effects (within) regression               Number of obs     =        301
Group variable: country2                        Number of groups  =         25

R-sq:                                           Obs per group:
     within  = 0.7095                                         min =          1
     between = 0.4164                                         avg =       12.0
     overall = 0.0050                                         max =         21

                                                F(21,255)         =      29.66
corr(u_i, Xb)  = -0.4428                        Prob > F          =     0.0000

------------------------------------------------------------------------------
    loggdppc |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
          ka |
         L1. |   .2355757   .0572047     4.12   0.000     .1229219    .3482295
             |
        year |
       1997  |   .0419334   .0341734     1.23   0.221    -.0253646    .1092314
       1998  |   .0661726   .0350231     1.89   0.060    -.0027988     .135144
       1999  |   .0856925    .035103     2.44   0.015     .0165638    .1548213
       2000  |    .099322   .0341923     2.90   0.004     .0319868    .1666573
       2001  |   .1287047   .0341876     3.76   0.000     .0613788    .1960306
       2002  |    .150422   .0351686     4.28   0.000      .081164    .2196799
       2003  |   .1780879   .0350638     5.08   0.000     .1090364    .2471394
       2004  |    .217291   .0360973     6.02   0.000     .1462043    .2883778
       2005  |   .2722467    .037468     7.27   0.000     .1984605    .3460329
       2006  |   .3210197   .0375514     8.55   0.000     .2470694      .39497
       2007  |   .3702423   .0375416     9.86   0.000     .2963114    .4441733
       2008  |   .4095371   .0453309     9.03   0.000     .3202665    .4988078
       2009  |   .4345497   .0451828     9.62   0.000     .3455708    .5235286
       2010  |   .4641847   .0450854    10.30   0.000     .3753976    .5529718
       2011  |   .5113764   .0450854    11.34   0.000     .4225894    .6001635
       2012  |   .5211868   .0526365     9.90   0.000     .4175292    .6248443
       2013  |   .5580252   .0526365    10.60   0.000     .4543677    .6616828
       2014  |   .5769499   .0566277    10.19   0.000     .4654323    .6884675
       2015  |   .6101766   .0566277    10.78   0.000      .498659    .7216942
       2016  |   .6404074   .0566277    11.31   0.000     .5288898     .751925
             |
       _cons |   7.264662   .0459164   158.22   0.000     7.174238    7.355086
-------------+----------------------------------------------------------------
     sigma_u |  .53813001
     sigma_e |  .11135118
         rho |  .95894112   (fraction of variance due to u_i)
------------------------------------------------------------------------------
F test that all u_i=0: F(24, 255) = 209.43                   Prob > F = 0.0000
I thought the constant and the coefficient should be the same for the second regression and the base level of the first regression. However, as you can see they are completely different. This is the same for the other income groups, which I won't post here due to space. I'm not sure now which results I should trust. I would be very grateful if someone could tell me what I'm missing.