I have some issues understanding year-dummies being dropped in a fixed effects panel regression. I have about 280 entities with observations over 23 years, testing relation between firm stability and competition whereas z is the insolvency ratio, HHI the competition measure and the rest control variables. I get that the first year is omitted to avoid the dummy-trap. What I do not understand however, is why STATA instead drops the last four years. There are no missing variables, correlation between the regressors are low and a low VIF. Would greatly appreciate if you could help me on the way. Below are an example of the data set, regression commands and correlation diagnostic results.
Code:
* Example generated by -dataex-. To install: ssc install dataex
clear
input float z double(HHI INFLATION GDPG) byte BANKOWN float(TBT CTI lnta) byte(yr3 yr4)
40.49671 963.8486627607208 .023 .026000000000000002 0 0 .17307693 6.569481 0 1
50.642 963.8486627607208 .023 .026000000000000002 0 0 .16666667 6.651572 0 1
25.286806 963.8486627607208 .023 .026000000000000002 0 0 .20143884 7.620705 0 1
58.28053 963.8486627607208 .023 .026000000000000002 0 0 .12676056 6.929517 0 1
. 963.8486627607208 .023 .026000000000000002 0 0 .1847826 7.114769 0 1
66.26539 963.8486627607208 .023 .026000000000000002 0 0 .12782194 8.328185 0 1
32.80132 963.8486627607208 .023 .026000000000000002 0 0 .12658228 7.046647 0 1
271.304 963.8486627607208 .023 .026000000000000002 0 0 .2 4.1108737 0 1
26.37916 963.8486627607208 .023 .026000000000000002 0 0 .1875 5.342334 0 1
72.42193 963.8486627607208 .023 .026000000000000002 0 0 .20754717 6.603944 0 1
114.3582 963.8486627607208 .023 .026000000000000002 0 0 .171875 6.76273 0 1
230.14607 963.8486627607208 .023 .026000000000000002 0 0 .12795275 8.8454895 0 1
63.12717 963.8486627607208 .023 .026000000000000002 0 0 .18333334 6.647688 0 1
45.9433 963.8486627607208 .023 .026000000000000002 0 0 .24 6.001415 0 1
44.64632 963.8486627607208 .023 .026000000000000002 0 0 .10756395 9.80593 0 1
.9109095 963.8486627607208 .023 .026000000000000002 0 0 .3236181 8.7088375 0 1
32.15652 963.8486627607208 .023 .026000000000000002 0 0 .17307693 6.507277 0 1
21.87874 963.8486627607208 .023 .026000000000000002 0 0 .11764706 7.109879 0 1
12.687154 963.8486627607208 .023 .026000000000000002 0 1 .13198802 12.400545 0 1
108.2294 963.8486627607208 .023 .026000000000000002 0 0 .13636364 5.888878 0 1
49.57047 963.8486627607208 .023 .026000000000000002 0 0 .17857143 5.950643 0 1
21.22993 963.8486627607208 .023 .026000000000000002 0 0 .2857143 5.365976 0 1
30.459864 963.8486627607208 .023 .026000000000000002 0 0 .2016129 7.431892 0 1
43.08752 963.8486627607208 .023 .026000000000000002 0 0 .16949153 6.694562 0 1
41.08426 963.8486627607208 .023 .026000000000000002 0 0 .22727273 5.583496 0 1
54.58025 963.8486627607208 .023 .026000000000000002 0 0 .11438064 10.279215 0 1
24.860386 963.8486627607208 .023 .026000000000000002 0 0 .14285715 6.582025 0 1
61.71256 963.8486627607208 .023 .026000000000000002 0 0 .15277778 6.884487 0 1
46.07439 963.8486627607208 .023 .026000000000000002 0 0 .2 5.241747 0 1
24.70525 963.8486627607208 .023 .026000000000000002 0 0 .14782609 7.357556 0 1
end
Code:
xtreg z HHI INFLATION GDPG BANKOWN TBT CTI lnta yr3 yr4 yr5 yr6 yr7 yr8 yr9 yr10 yr11 yr12 yr13 yr14 yr15 yr16 yr17 yr18 yr19 yr20 yr21 yr22 yr23, fe vce(robust)
Code:
note: yr20 omitted because of collinearity
note: yr21 omitted because of collinearity
note: yr22 omitted because of collinearity
note: yr23 omitted because of collinearity
Fixed-effects (within) regression Number of obs = 2,479
Group variable: banknumber Number of groups = 183
R-sq: Obs per group:
within = 0.2137 min = 1
between = 0.0473 avg = 13.5
overall = 0.1404 max = 21
F(22,182) = .
corr(u_i, Xb) = -0.2449 Prob > F = .
(Std. Err. adjusted for 183 clusters in banknumber)
------------------------------------------------------------------------------
| Robust
z | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
HHI | -.0303108 .0210892 -1.44 0.152 -.0719216 .0113
INFLATION | -76.55149 2956.977 -0.03 0.979 -5910.916 5757.813
GDPG | 618.2998 6259.327 0.10 0.921 -11731.88 12968.48
BANKOWN | -51.5391 1.834326 -28.10 0.000 -55.15838 -47.91982
TBT | 6.363655 7.903644 0.81 0.422 -9.230899 21.95821
CTI | .088925 .0078083 11.39 0.000 .0735187 .1043314
lnta | -2.797636 3.258536 -0.86 0.392 -9.227001 3.631729
yr3 | -3.499378 240.9092 -0.01 0.988 -478.8335 471.8348
yr4 | -12.13843 67.57561 -0.18 0.858 -145.4708 121.1939
yr5 | -9.316379 29.27241 -0.32 0.751 -67.0733 48.44054
yr6 | -25.4756 124.5805 -0.20 0.838 -271.2834 220.3322
yr7 | -26.15843 51.65594 -0.51 0.613 -128.08 75.76308
yr8 | -31.83699 42.2322 -0.75 0.452 -115.1647 51.49069
yr9 | -36.40373 38.43623 -0.95 0.345 -112.2416 39.43419
yr10 | -36.69725 83.37978 -0.44 0.660 -201.2126 127.8181
yr11 | -30.16158 35.28397 -0.85 0.394 -99.77982 39.45666
yr12 | -17.19835 39.88307 -0.43 0.667 -95.89101 61.49431
yr13 | -23.97309 31.51084 -0.76 0.448 -86.14663 38.20045
yr14 | -7.781279 36.09541 -0.22 0.830 -79.00055 63.43799
yr15 | 18.64135 222.2024 0.08 0.933 -419.7826 457.0653
yr16 | 5.363992 64.73919 0.08 0.934 -122.3719 133.0999
yr17 | 6.543575 81.76287 0.08 0.936 -154.7814 167.8686
yr18 | -8.039695 3.074036 -2.62 0.010 -14.10503 -1.974364
yr19 | 1.061594 62.29068 0.02 0.986 -121.8431 123.9663
yr20 | 0 (omitted)
yr21 | 0 (omitted)
yr22 | 0 (omitted)
yr23 | 0 (omitted)
_cons | 108.1678 152.8147 0.71 0.480 -193.3485 409.684
-------------+----------------------------------------------------------------
sigma_u | 32.204441
sigma_e | 29.860322
rho | .53771512 (fraction of variance due to u_i)
------------------------------------------------------------------------------
Code:
| z HHI INFLAT~N GDPG BANKOWN TBT CTI lnta yr3
-------------+---------------------------------------------------------------------------------
z | 1.0000
HHI | -0.1890 1.0000
INFLATION | 0.0934 -0.2442 1.0000
GDPG | 0.1708 -0.3147 -0.2625 1.0000
BANKOWN | -0.1123 0.0414 0.0073 -0.0692 1.0000
TBT | -0.0454 -0.0204 0.0008 0.0119 0.1811 1.0000
CTI | 0.0049 0.0210 -0.0013 -0.0067 -0.0022 0.1702 1.0000
lnta | -0.1420 0.3226 -0.0323 -0.1947 0.3210 0.4046 0.0824 1.0000
yr3 | 0.2928 -0.3255 0.1032 0.5400 -0.0346 0.0207 -0.0006 -0.1550 1.0000
yr4 | 0.1414 -0.3457 0.0521 0.1040 -0.0360 0.0189 -0.0021 -0.1240 -0.0540
yr5 | 0.0911 -0.2151 0.0802 0.0041 -0.0178 0.0178 -0.0036 -0.1103 -0.0549
yr6 | 0.0422 -0.2509 0.2711 0.2072 -0.0178 0.0025 -0.0036 -0.1015 -0.0549
yr7 | 0.0104 -0.2862 0.2182 0.0212 -0.0183 0.0021 -0.0044 -0.0815 -0.0553
yr8 | -0.0448 -0.2938 -0.2223 -0.0986 -0.0092 -0.0133 -0.0041 -0.0518 -0.0555
yr9 | -0.0985 -0.2713 0.1075 -0.1820 0.0108 -0.0129 -0.0021 -0.0436 -0.0549
yr10 | -0.0831 0.0972 -0.4541 0.3344 -0.0161 -0.0118 -0.0001 -0.0378 -0.0535
yr11 | -0.0782 -0.0104 -0.1335 0.1023 0.0140 0.0043 0.0000 -0.0071 -0.0531
yr12 | -0.0475 0.0844 0.0512 0.0695 0.0042 0.0043 -0.0015 0.0163 -0.0531
yr13 | -0.0495 0.0542 -0.3601 0.1628 0.0169 0.0060 -0.0075 0.0263 -0.0515
yr14 | -0.0848 0.1080 0.4397 -0.2377 0.0655 0.0052 -0.0083 0.0626 -0.0522
yr15 | -0.0032 0.1443 0.0244 -0.5920 0.0356 0.0052 -0.0074 0.0621 -0.0522
yr16 | 0.0144 0.0929 0.0709 -0.1909 0.0123 0.0094 -0.0067 0.0618 -0.0485
yr17 | 0.0015 0.1906 -0.2009 -0.1509 0.0506 0.0075 -0.0070 0.0840 -0.0501
yr18 | -0.0555 0.3105 -0.3540 0.1057 -0.0073 0.0108 -0.0067 0.0488 -0.0473
yr19 | -0.0565 0.2909 -0.0014 -0.1401 -0.0172 -0.0061 0.0966 0.0632 -0.0466
yr20 | -0.0344 0.2984 -0.0014 0.0035 -0.0169 -0.0059 -0.0064 0.0729 -0.0463
yr21 | 0.0103 0.2243 -0.0014 0.0035 -0.0073 -0.0243 -0.0060 0.0874 -0.0473
yr22 | -0.0117 0.1872 0.3512 -0.1132 -0.0073 -0.0243 -0.0059 0.0983 -0.0473
yr23 | 0.0318 0.1459 -0.0677 0.0033 -0.0031 -0.0229 -0.0057 0.1096 -0.0445
| yr4 yr5 yr6 yr7 yr8 yr9 yr10 yr11 yr12
-------------+---------------------------------------------------------------------------------
yr4 | 1.0000
yr5 | -0.0562 1.0000
yr6 | -0.0562 -0.0571 1.0000
yr7 | -0.0567 -0.0576 -0.0576 1.0000
yr8 | -0.0569 -0.0578 -0.0578 -0.0583 1.0000
yr9 | -0.0562 -0.0571 -0.0571 -0.0576 -0.0578 1.0000
yr10 | -0.0549 -0.0558 -0.0558 -0.0562 -0.0564 -0.0558 1.0000
yr11 | -0.0544 -0.0553 -0.0553 -0.0558 -0.0560 -0.0553 -0.0540 1.0000
yr12 | -0.0544 -0.0553 -0.0553 -0.0558 -0.0560 -0.0553 -0.0540 -0.0535 1.0000
yr13 | -0.0528 -0.0537 -0.0537 -0.0541 -0.0543 -0.0537 -0.0524 -0.0520 -0.0520
yr14 | -0.0535 -0.0544 -0.0544 -0.0548 -0.0550 -0.0544 -0.0531 -0.0526 -0.0526
yr15 | -0.0535 -0.0544 -0.0544 -0.0548 -0.0550 -0.0544 -0.0531 -0.0526 -0.0526
yr16 | -0.0497 -0.0505 -0.0505 -0.0509 -0.0511 -0.0505 -0.0493 -0.0489 -0.0489
yr17 | -0.0514 -0.0522 -0.0522 -0.0527 -0.0529 -0.0522 -0.0510 -0.0506 -0.0506
yr18 | -0.0485 -0.0493 -0.0493 -0.0497 -0.0498 -0.0493 -0.0481 -0.0477 -0.0477
yr19 | -0.0477 -0.0485 -0.0485 -0.0489 -0.0491 -0.0485 -0.0473 -0.0469 -0.0469
yr20 | -0.0475 -0.0482 -0.0482 -0.0486 -0.0488 -0.0482 -0.0471 -0.0467 -0.0467
yr21 | -0.0485 -0.0493 -0.0493 -0.0497 -0.0498 -0.0493 -0.0481 -0.0477 -0.0477
yr22 | -0.0485 -0.0493 -0.0493 -0.0497 -0.0498 -0.0493 -0.0481 -0.0477 -0.0477
yr23 | -0.0457 -0.0464 -0.0464 -0.0468 -0.0469 -0.0464 -0.0453 -0.0449 -0.0449
| yr13 yr14 yr15 yr16 yr17 yr18 yr19 yr20 yr21
-------------+---------------------------------------------------------------------------------
yr13 | 1.0000
yr14 | -0.0511 1.0000
yr15 | -0.0511 -0.0518 1.0000
yr16 | -0.0475 -0.0481 -0.0481 1.0000
yr17 | -0.0491 -0.0497 -0.0497 -0.0462 1.0000
yr18 | -0.0463 -0.0469 -0.0469 -0.0436 -0.0450 1.0000
yr19 | -0.0456 -0.0462 -0.0462 -0.0429 -0.0443 -0.0418 1.0000
yr20 | -0.0453 -0.0459 -0.0459 -0.0427 -0.0441 -0.0416 -0.0409 1.0000
yr21 | -0.0463 -0.0469 -0.0469 -0.0436 -0.0450 -0.0425 -0.0418 -0.0416 1.0000
yr22 | -0.0463 -0.0469 -0.0469 -0.0436 -0.0450 -0.0425 -0.0418 -0.0416 -0.0425
yr23 | -0.0436 -0.0442 -0.0442 -0.0410 -0.0424 -0.0400 -0.0394 -0.0392 -0.0400
| yr22 yr23
-------------+------------------
yr22 | 1.0000
yr23 | -0.0400 1.0000
Code:
collin z HHI INFLATION GDPG BANKOWN TBT CTI lnta yr3 yr4 yr5 yr6 yr7 yr8 yr9 yr10 yr11 yr12 yr13 yr14 yr15 yr16 yr17 yr18 yr19 yr20 yr21 yr22 yr23
Code:
Collinearity Diagnostics
SQRT R-
Variable VIF VIF Tolerance Squared
----------------------------------------------------
z 1.20 1.09 0.8355 0.1645
HHI 2.77e+14 1.7e+07 0.0000 1.0000
INFLATION 2.43e+13 4.9e+06 0.0000 1.0000
GDPG 3.75e+13 6.1e+06 0.0000 1.0000
BANKOWN 1.14 1.07 0.8763 0.1237
TBT 1.29 1.13 0.7776 0.2224
CTI 1.04 1.02 0.9596 0.0404
lnta 1.55 1.25 0.6445 0.3555
yr3 -5.37e+12 . -0.0000 1.0000
yr4 8.89e+12 3.0e+06 0.0000 1.0000
yr5 2.19e+12 1.5e+06 0.0000 1.0000
yr6 3.13e+12 1.8e+06 0.0000 1.0000
yr7 5.94e+12 2.4e+06 0.0000 1.0000
yr8 1.93e+13 4.4e+06 0.0000 1.0000
yr9 1.34e+13 3.7e+06 0.0000 1.0000
yr10 -2.64e+13 . -0.0000 1.0000
yr11 -9.59e+12 . -0.0000 1.0000
yr12 9.20e+12 3.0e+06 0.0000 1.0000
yr13 -2.29e+13 . -0.0000 1.0000
yr14 3.14e+13 5.6e+06 0.0000 1.0000
yr15 -1.15e+13 . -0.0000 1.0000
yr16 1.04e+12 1.0e+06 0.0000 1.0000
yr17 -1.59e+13 . -0.0000 1.0000
yr18 -9.10e+12 . -0.0000 1.0000
yr19 1.58e+13 4.0e+06 0.0000 1.0000
yr20 2.90e+13 5.4e+06 0.0000 1.0000
yr21 1.70e+13 4.1e+06 0.0000 1.0000
yr22 4.32e+13 6.6e+06 0.0000 1.0000
yr23 1.21e+12 1.1e+06 0.0000 1.0000
----------------------------------------------------
Mean VIF 1.51e+13
Cond
Eigenval Index
---------------------------------
1 6.0418 1.0000
2 1.4045 2.0741
3 1.2390 2.2082
4 1.1645 2.2778
5 1.0941 2.3500
6 1.0655 2.3813
7 1.0148 2.4400
8 1.0069 2.4496
9 1.0001 2.4578
10 1.0000 2.4580
11 1.0000 2.4580
12 1.0000 2.4580
13 1.0000 2.4580
14 1.0000 2.4580
15 1.0000 2.4580
16 1.0000 2.4580
17 1.0000 2.4580
18 1.0000 2.4580
19 1.0000 2.4580
20 1.0000 2.4580
21 1.0000 2.4580
22 0.9795 2.4835
23 0.8795 2.6210
24 0.7192 2.8985
25 0.3726 4.0269
26 0.0181 18.2487
27 0.0000 29990992.1720
28 -0.0000 .
29 -0.0000 .
30 -0.0000 .
---------------------------------
Condition Number .
Eigenvalues & Cond Index computed from scaled raw sscp (w/ intercept)
Det(correlation matrix) 0.0000
Thanks for any advice
Best,
Aaron
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