Panel Regression, Random Effect model

[JAMILA JALILOVA]

Hi! I am writing my master thesis and I urgently need help. I would be very thankful If you could provide your views on the below issue.
I want to see the effect of foreign aid on development of 24 random developing countries. I am using a panel regression. After making Hausman test using the following commands:
1) xtreg GDPpercapitaannualgrowth NetODAreceivedofGDP TradeofGDP Privatecreditbydepositmoney FDIofGDP GrosscapitalformationofGD Inflationconsumerpricesannu GeneralGovernmentFinalConsump ThedimensionofEducation loglabor i.Year, fe
2) estimate store fe and etc I chose random effect model.
Is the following command correct for a random effect regression?
xtreg GDPpercapitaannualgrowth NetODAreceivedofGDP TradeofGDP Privatecreditbydepositmoney FDIofGDP GrosscapitalformationofGD Inflationconsumerpricesannu GeneralGovernmentFinalConsump ThedimensionofEducation loglabor i.Year, re vce(cluster ID)
I am concertned about i.Year and vce(Cluster ID). Can we have time dummies and clustering in random effect model?

Thank you so much in advance for your help!

[Clyde Schechter]

I am concertned about i.Year and vce(Cluster ID). Can we have time dummies and clustering in random effect model?

Yes.

Is the following command correct for a random effect regression?

It is syntactically correct. Whether it will run and converge depends on your data. Whether it is a correct model for your economics problem, only an economist can advise you. Finally, remember the by-now well-worn quote from Box: "All models are wrong; some models are useful."

[Carlo Lazzaro]

Jamila:
welcome to this forum.
As an aside to Clyde's helpful advice, it would be interesting to know why you decided to cluster the standard errors in random effect model, as you seemingly used default standard errors for the fixed effect specification.
I'm also unclear with the way -hausman- outcome pointed you towards random effect, as -hausman- does not support non-default standard errors (and invoking clustered standard errors after -hausman- outcome is not the way to go). For more details, search for or the community-contributed programme -xtoverid-.

[JAMILA JALILOVA]

Dear all, thank you very much for your comments! I appreciate your help.