Econometric Model for areg options

[Tia Islam]

Hi, I am very new in Stata. For my analysis, I have used areg option as I have both firm fixed effect and year fixed effect. I have a question regarding how to write the econometric model if I use areg option for regression. As for OLS, we write:
Yit =ai+ B1Xit+B2Xit+Eit.
Same as that, how should I write my model if I use areg as my command?

Kindly help me with that.

[Carlo Lazzaro]

Tia:
welcome to this forum.
If you're dealing with a panel dataset, you'd probably better off with -xtreg,fe- or the community-contributed module -reghdfe-.

[Tia Islam]

Hi, I am dealing with a linear regression which is absorbing firm fixed effect as categorical factor. As far as I know this will allow me to include multiple observations under the same categories.

[Carlo Lazzaro]

Tia:
you may want to consider the following toy-example to be tweaked to your research needs:

. use "C:\Program Files\Stata17\ado\base\a\auto.dta"
(1978 automobile data)

. areg price mpg i.rep78, abs(foreign)

Linear regression, absorbing indicators          Number of obs     =        69
Absorbed variable: foreign                       No. of categories =         2
                                                 F(5, 62)          =      4.72
                                                 Prob > F          =    0.0010
                                                 R-squared         =    0.2758
                                                 Adj R-squared     =    0.2057
                                                 Root MSE          = 2595.6201

------------------------------------------------------------------------------
       price | Coefficient  Std. err.      t    P>|t|     [95% conf. interval]
-------------+----------------------------------------------------------------
         mpg |  -299.6068   63.34525    -4.73   0.000    -426.2322   -172.9815
             |
       rep78 |
          2  |   841.3622   2055.452     0.41   0.684    -3267.428    4950.153
          3  |   1285.116   1901.486     0.68   0.502    -2515.901    5086.132
          4  |   1155.571   1984.561     0.58   0.562     -2811.51    5122.652
          5  |   2353.179   2130.577     1.10   0.274    -1905.784    6612.142
             |
       _cons |   11191.74   2322.915     4.82   0.000     6548.294    15835.18
------------------------------------------------------------------------------
F test of absorbed indicators: F(1, 62) = 1.494               Prob > F = 0.226

.

Please note that -areg- can absorb one variable only.

[Tia Islam]

Hi Carlo,

I understand. Thank you so much for the help.