Choosing reference/base periods in panel data and normalizing the corresponding coefficient to zero

[Paul Lavery]

Hi

I am looking to do two things with a panel dataset (c350 firms and annual data from 2008 to 2016).

1. I would like to set 2011 as the base period for the variable i.Year in the following regression and normalize the corresponding coefficient to zero:

xtreg inv i.Year i.company, fe cluster(company)

I am interested in the coefficients on the year dummy variables above.


2. I would like to set the omitted variable below to 2011 for the Year variable so as to include coefficients for (2008*eba), (2009*eba), (2010*eba), (2012*eba), (2013*eba) etc - but not (2011*eba). The dummy variable eba takes the value 1 or 2 and the year variable takes values from 2008 to 2016.

xtreg inv i.Year i.comp eba#i.Year, fe cluster(comp)

I have seen other posts looking at setting reference periods, but none of the posted solutions seemed to work on my data, so I was wondering if the solution was different.

Any advice would be very much appreciated,
Thanks
Paul

[Clyde Schechter]

xtreg inv ib2011.Year i.comp, fe cluster(comp)
xtreg inv i.comp i.eba##ib2011.Year, fe cluster(comp)

Note: the interaction model I have coded here may be different from what you wrote, but if so, yours is mis-specified. If the variable eba is a time-invariant attribute of the panel variable used in your -xtset- command, then the two models are equivalent. But if eba can vary over time within a panel, then the model you coded with it in #1 is mis-specified because it omits mention of eba outside the interaction. Do notice the important distinction between ## and #. Both that and the specification of base levels of factor variables are explained in greater detail at -help fvvarlist-.

[Paul Lavery]

The eba dummy is indeed time-invariant.

Many thanks Clyde.

[Paul Lavery]

Hi Clyde/other Stata users,

I have a similar issue to the above, however I now have the added complexity of using a panel data set where i would like the base period to be different for each firm within the panel.

The data is an example using dataex - I would like the base period to be set the the DealYear for each firmid, which differs across firms. I wasn't sure if this was possible to do so.

* Example generated by -dataex-. To install: ssc install dataex
clear
input float(firmid Year DealYear Investment eba)
 1 2005 2006 4 0
 1 2006 2006 9 0
 1 2007 2006 1 0
 1 2008 2006 3 0
 1 2009 2006 1 0
 1 2010 2006 7 0
 1 2011 2006 7 0
 1 2012 2006 4 0
 2 2005 2009 3 1
 2 2006 2009 4 1
 2 2007 2009 6 1
 2 2008 2009 7 1
 2 2009 2009 4 1
 2 2010 2009 2 1
 2 2011 2009 5 1
 2 2012 2009 7 1
 3 2005 2009 3 1
 3 2006 2009 5 1
 3 2007 2009 2 1
 3 2008 2009 1 1
 3 2009 2009 1 1
 3 2010 2009 4 1
 3 2011 2009 5 1
 3 2012 2009 6 1
 4 2005 2011 7 0
 4 2006 2011 3 0
 4 2007 2011 8 0
 4 2008 2011 4 0
 4 2009 2011 7 0
 4 2010 2011 8 0
 4 2011 2011 3 0
 4 2012 2011 2 0
 5 2005 2009 5 1
 5 2006 2009 8 1
 5 2007 2009 3 1
 5 2008 2009 3 1
 5 2009 2009 9 1
 5 2010 2009 9 1
 5 2011 2009 1 1
 5 2012 2009 7 1
 6 2005 2006 4 1
 6 2006 2006 9 1
 6 2007 2006 1 1
 6 2008 2006 3 1
 6 2009 2006 1 1
 6 2010 2006 7 1
 6 2011 2006 7 1
 6 2012 2006 4 1
 7 2005 2008 3 1
 7 2006 2008 4 1
 7 2007 2008 6 1
 7 2008 2008 7 1
 7 2009 2008 4 1
 7 2010 2008 2 1
 7 2011 2008 5 1
 7 2012 2008 7 1
 8 2005 2007 3 1
 8 2006 2007 5 1
 8 2007 2007 2 1
 8 2008 2007 1 1
 8 2009 2007 1 1
 8 2010 2007 4 1
 8 2011 2007 5 1
 8 2012 2007 6 1
 9 2005 2011 7 0
 9 2006 2011 3 0
 9 2007 2011 8 0
 9 2008 2011 4 0
 9 2009 2011 7 0
 9 2010 2011 8 0
 9 2011 2011 3 0
 9 2012 2011 2 0
10 2005 2010 5 1
10 2006 2010 8 1
10 2007 2010 3 1
10 2008 2010 3 1
10 2009 2010 9 1
10 2010 2010 9 1
10 2011 2010 1 1
10 2012 2010 7 1
end

Any advice is apreciated.