Stata Panel Data

Mastering requires practice and reference.

), reject the null hypothesis. Significant panel effects exist; therefore, . If it is not significant, use Pooled OLS . 5. Addressing Diagnostic Issues

From long to wide:

The Hausman test assumes homoskedasticity. Use hausman fe re, sigmamore for robust version.

In macro-panels (e.g., datasets covering multiple countries over many years), shocks like global financial crises can affect all entities simultaneously. This creates cross-sectional dependence. You can test for this using Pesaran’s CD test: xtcsd, pesaran abs Use code with caution. stata panel data

Pooled Ordinary Least Squares treats panel data as one large cross-section, ignoring the time and individual dimensions. regress y x1 x2 x3 Use code with caution.

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Often, data arrives in : | id | wage2015 | wage2016 | exp2015 | exp2016 | |----|----------|----------|---------|---------|

┌──────────────────────────────┐ │ Panel Data Analysis │ └──────────────┬───────────────┘ │ ┌───────────────────────┼───────────────────────┐ ▼ ▼ ▼ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │ Pooled OLS │ │ Fixed Effects │ │ Random Effects │ │ (regress) │ │ (xtreg, fe) │ │ (xtreg, re) │ └─────────────────┘ └─────────────────┘ └─────────────────┘ A. Pooled OLS ( regress ) Mastering requires practice and reference

The single most important step in Stata panel data analysis is declaring your data structure using . This command tells Stata which variable identifies the panels and which identifies the time dimension.

| Task | Command | |------|---------| | Declare panel | xtset id time | | FE regression | xtreg y x1 x2, fe | | RE regression | xtreg y x1 x2, re | | Hausman test | hausman fe re | | Cluster SE | , robust or vce(cluster id) | | Lag variable | gen x_lag = L.x | | Panel line plot | xtline y | | Drop if no variation | xtpattern, gen(pat); drop if pat == "111111" | | Fill gaps | tsfill, full |

Choosing between Pooled OLS, Fixed Effects, and Random Effects requires rigorous statistical testing. Stata streamlines this process using postestimation commands.

xtserial wage hours tenure

The null hypothesis of the Hausman test is that the unit‑specific effects are uncorrelated with the regressors (i.e., RE is consistent and efficient). The alternative is that they are correlated (RE is inconsistent, FE is consistent).

using do files. Because panel data often require complex reshaping, merging, and lag generation, a well‑commented script is essential for replication.

No two observations should share the same combination of panel ID and time ID. This uniqueness is the bedrock of panel data.