I'm doing a difference-in-difference report on whether the EU Industrial Emissions Directive (implemented in 2011) had an effect on exports, with UK exports as my treatment group and Australia as my control group. I have panel data from 1990-2018. This is my equation:
Exports = β0 + β1y2011 + β2country + β3y2011*Country + control variables+ ε
where y2011 = 1 for observations from 2011 onwards, 0 otherwise. Country=1 for UK, 0 otherwise.
I attempted to add fixed effects to the regression but encountered several issues.
1) When I added (,fe) to the end of my xtreg command, it knocked out my 'country' dummy variable due to collinearity.
2) When I added i.y2011 and i.country to include time and country fixed variables respectively via dummy variables instead of using the (,fe) within estimator, I found that the coefficients I got (apart from β0) were exactly the same as the regression without the fixed effects.
I am unsure as to whether I would need a different equation to take the following fixed effects into account. I saw online that to add fixed effects, the equation has to change into a different form but I am not sure how to change my current equation into one that takes fixed effects into account and how I will be able to do this on STATA. Any help with this is greatly appreciated.
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