Hi,
I am dealing with panel data analysis (fixed effects with robust standard errors). The data has a large N (120) and small T (10). I have a dependent variable which is a ratio variable and my independent variable is the number of incidents annualy.
1) If I don't change teh variable and keep the original form , I get a scatterplot like this:
Array
2) If I take the log of my dependent variable (rate) and leave independent, I get the scatterplot like this:
Array
3) If I take natural logs of both i.e. dependent and independent. Also, my independent variable has zero values when no incident took place. So I have used the command log (incidents+1)
I get a scatter-plot like this.
Array
Now my question is, that even I use the data in point (2), where my dependent is logged and independent is not. Is that be okay? or I have to normalize the plot as shown in figure 3. What sort of points shall I keep in mind using (2) form of data or (3) form of data. In the literature, I have seen multiple practices i.e. in some they have taken logs and in some papers, they haven't.
You help in this regard shall be appreciated.
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