Good evening everybody,

I have posted this question elsewhere in stata forum but I did not get any response: (https://www.statalist.org/forums/for...85#post1636485)

Therefore I'm posting my issue again. I apologize in advance if this construed as a spam.

I am trying to estimate a fixed-effects model using xtreg command in stata 17.0.

My econometric model is as under:

ki,t - ki,t-1 (1 - ΛhatZi,t-1 ) = β [(ΛhatZi,t-1 ) Xi,t-1] + ηi,t

where ΛhatZi,t-1 are estimated values from a pooled regression.
I generate the LHS variable using the generate command and then try to use the following command:

xtreg LHS_thirdstep c.soa_tier2_nocons1#( i.l.state1nonstate0 c.l.size c.l.profitability_w c.l.provforNPA_to_net_advances_w ///
c.l.net_advances_to_assets_w c.l.market_funding_w i.l.Listeddummy1iflisted)] Y5-Y20, fe vce(robust)


However, there seems to be an issue with my results. My indicator variables (two indicator variables taking value either 0 or 1) are not exhibiting results as they should be ideally doing (i.e. for the reference category 1). Also depending on how i order the indicator variables one of the category gets dropped. I reproduce the results from xtreg command with fe option.

note: 1L.state1nonstate0#c.soa_tier2_nocons1 omitted because of collinearity
Robust
LHS_thirdstep Coef. Std. Err. t P>t [95% Conf. Interval]
c.soa_tier2_nocons1#cL.size -1.204929 .8239942 1.46 0.149 -2.853162 .4433053
c.soa_tier2_nocons1#cL.profitability_w .8311909 .4674114 1.78 0.080 -.1037711 1.766153
c.soa_tier2_nocons1#cL.provforNPA_to_net_advances_ w .4286864 .3364938 1.27 0.208 -.2444014 1.101774
c.soa_tier2_nocons1#cL.net_advances_to_assets_w -.0698509 .0623602 1.12 0.267 -.1945898 .054888
c.soa_tier2_nocons1#cL.market_funding_w .0651142 .0322979 2.02 0.048 .0005087 .1297196
L.Listeddummy1iflisted#c.soa_tier2_nocons1
0 23.0813 14.32946 1.61 0.112 -5.581884 51.74448
1 22.723 13.72806 1.66 0.103 -4.737198 50.1832
L.state1nonstate0#c.soa_tier2_nocons1
0 -.4240838 1.735835 0.24 0.808 -3.89627 3.048102
1 0 (omitted)
Y5 .2792379 .5636733 0.50 0.622 -.8482766 1.406752
Y6 -.637602 .6677788 0.95 0.344 -1.973358 .6981545
Y7 .7873123 .4665592 1.69 0.097 -.1459451 1.72057
Y8 .5926671 .6799688 0.87 0.387 -.7674731 1.952807
Y9 1.562704 .8756274 1.78 0.079 -.1888116 3.31422
Y10 2.134863 .874211 2.44 0.018 .3861808 3.883546
Y11 1.988466 1.172886 1.70 0.095 -.3576549 4.334587
Y12 2.454433 1.119152 2.19 0.032 .2157971 4.69307
Y13 2.115506 1.135905 1.86 0.067 -.1566421 4.387655
Y14 1.494296 1.297193 1.15 0.254 -1.100476 4.089068
Y15 1.31945 1.45346 0.91 0.368 -1.587903 4.226803
Y16 1.908256 1.379692 1.38 0.172 -.8515392 4.668051
Y17 2.02002 1.334612 1.51 0.135 -.6496013 4.689642
Y18 2.59642 1.417224 1.83 0.072 -.2384511 5.43129
Y19 2.7659 1.513867 1.83 0.073 -.2622841 5.794085
Y20 2.62843 1.773836 1.48 0.144 -.9197715 6.176631
_cons -.7346817 2.278107 0.32 0.748 -5.291574 3.822211
sigma_u 2.4584079
sigma_e 1.777728
rho .65663981 (fraction of variance due to u_i)
This is happening even when I estimate without inclusion of year FE:
(Std. Err. adjusted for 61 clusters in Bankcode)
Robust
LHS_thirdstep Coef. Std. Err. t P>t [95% Conf. Interval]
c.soa_tier2_nocons1#cL.size .0172878 .3759817 0.05 0.963 -.7347875 .7693631
c.soa_tier2_nocons1#cL.profitability_w .5583617 .2504609 2.23 0.030 .0573654 1.059358
c.soa_tier2_nocons1#cL.provforNPA_to_net_advances_ w .4084313 .1672226 2.44 0.018 .0739362 .7429264
c.soa_tier2_nocons1#cL.net_advances_to_assets_w .0417223 .0391258 1.07 0.291 -.0365409 .1199856
c.soa_tier2_nocons1#cL.market_funding_w .0287254 .032788 0.88 0.384 -.0368603 .0943111
L.Listeddummy1iflisted#c.soa_tier2_nocons1
0 4.354254 4.168328 1.04 0.300 -3.983643 12.69215
1 3.457041 3.648269 0.95 0.347 -3.840583 10.75467
L.state1nonstate0#c.soa_tier2_nocons1
0 3.063894 1.689645 1.81 0.075 -.3158989 6.443686
1 0 (omitted)
_cons .4912929 .6968191 0.71 0.484 -.9025529 1.885139
sigma_u 3.1152293
sigma_e 1.8472187
rho .73986044 (fraction of variance due to u_i)
Any help would be much appreciated.

Thanks and regards.