Im using panel data to analyse Growth rates in Health expenditures for some OECD countries.
I want to decide on whether to use a pooled regression model, a random effect model or a fixed effect model.
I want to start with comparing pooled OLS with random effect model.
To do this I want to do a Breusch and Pagan LM test for random effects.
This is what I type in Stata and what I get:
xtset land year
panel variable: land (unbalanced)
time variable: year, 1970 to 2015
delta: 1 unit
xtreg d.lnhcen d.lngdpn d.lngdpn_1 d.lngdpn_2 d.lngdpn_3 d.lno80, re
estimates store random_effects
. xttest0
Breusch and Pagan Lagrangian multiplier test for random effects
D.lnhcen[land,t] = Xb + u[land] + e[land,t]
Estimated results:
| Var sd = sqrt(Var)
---------+-----------------------------
not sorted
r(5)
So what does it mean that its not sortet? and how can I test whether to use pooled OLS or random effect?
I want to decide on whether to use a pooled regression model, a random effect model or a fixed effect model.
I want to start with comparing pooled OLS with random effect model.
To do this I want to do a Breusch and Pagan LM test for random effects.
This is what I type in Stata and what I get:
xtset land year
panel variable: land (unbalanced)
time variable: year, 1970 to 2015
delta: 1 unit
xtreg d.lnhcen d.lngdpn d.lngdpn_1 d.lngdpn_2 d.lngdpn_3 d.lno80, re
estimates store random_effects
. xttest0
Breusch and Pagan Lagrangian multiplier test for random effects
D.lnhcen[land,t] = Xb + u[land] + e[land,t]
Estimated results:
| Var sd = sqrt(Var)
---------+-----------------------------
not sorted
r(5)
So what does it mean that its not sortet? and how can I test whether to use pooled OLS or random effect?
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