Hi all,

I am running a regression using data on individuals from different countries. All variables vary across individuals and over time, except for one (call it x) which changes across countries and over time (i.e. it takes the same value for all individuals in a particular country and in a particular period). My regression includes as well country and time fixed effects using the factor notation "i.year i.country".

When I interact country and time to create a country-specific linear time trend (including the code "i.country##c.year" in place of "i.year i.country") Stata still gives me an estimate for the effect of x, which makes I assume it makes sense since x does not follow a linear trend over time. However, when interact country and time allowing for non-linear country-specific time trends (using the code "i.country##i.year"), Stata still gives me an estimate for the effect of x.

How is that possible? Shouldn't drop x because of collinearity with the country-specific time dummies? Any help with this is much appreciated!

Thanks,
Eduard