Hi
I am doing with panel data ( N=760. T=8) / When I check the correlation of variables the result as below
Code:
. cor lgdp lpgdp llpitotal ldistance dummyrta dummyland
(obs=760)

             |     lgdp    lpgdp llpito~l ldista~e dummyrta dummyl~d
-------------+------------------------------------------------------
        lgdp |   1.0000
       lpgdp |   0.5828   1.0000
   llpitotal |   0.6877   0.8127   1.0000
   ldistance |  -0.1035   0.0362  -0.0964   1.0000
    dummyrta |   0.1802  -0.0449   0.0936  -0.6347   1.0000
   dummyland |  -0.1100   0.0345  -0.0166  -0.0981  -0.0314   1.0000


. vif

    Variable |       VIF       1/VIF  
-------------+----------------------
   llpitotal |      3.81    0.262300
       lpgdp |      3.16    0.316329
        lgdp |      2.01    0.498312
    dummyrta |      1.76    0.566745
   ldistance |      1.74    0.575154
   dummyland |      1.05    0.949584
-------------+----------------------
    Mean VIF |      2.26
As in the first table, the correlation between llpitota and lpgdp is quite high ( 0.81) but in the vif test, the result is quite small
So how can I conclude about the correlation between llpitotal and lpgdp or is there any problem if I use these 2 variables together to estimate
Thanks