Hello,
I am currently writing a thesis on democratization in Latin America and the Caribbean.
I have paneldata consisting of 22 countries over a period of time from 1975-2010 with 5 years intervals.
My dependent variable is "democracy" and my independent variable is an index called "economicdevelopment", consisting of GDP per capita, education, urbanization and industrialization.
We're basically testing the modernization theory, expecting that economic development has a positive effect on democracy.
We would like to know whether we should use random- or fixed-effects. Our Hausman test suggest RE due to a high p-value 0.996.
We're unsure about the results, because we cant really seem to figure out WHY we should use RE. We cant find any reason that supports our argumentation, besides the Hausman test, on why we should use RE. We have to write som eadvantages in our study, so we would like to ask you, what the advantages of RE is and why it is good for our thesis.
So far our OLS and RE regressions get the same results (which is good?) but we need another argument for using RE besides the Hausman test.
We are not experts at stata, so if you could please try to explain it as simple as possible that would be fantastic! Thank you.
Hope you can help us.
Best regards Simone
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