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  • panel regression model

    I am a management student, currently writing my master thesis. I would be grateful for any help!

    The purpose of my research is to analyse if FDI is a channel of knowledge spillovers in the region of the Western Balkans

    The dependent variable is productivity based on the available data for a period of 10 years and 6 countries/

    The other variables are:
    • FDI as a % of GDP
    • Inflation
    • Competition, GDP per capita, and trade openness as a proxy for the absorptive capacity
    • Level of corruption and political stability as a proxy for the institutional quality
    My question:

    To check whether I should use a fixed-effects or random-effects model, I did the Hausman test, but the output does not seem right.

    From the p-value, I doo not reject the null hypothesis so in theory I should go for the RE but it appears that "V_b-V_B is not positive definite".

    I also tried by adding "hausman fixed random, sigmamore", but that does not change anything to my results.

    What would you recommend me to do? Does that simply mean I will have to stick to the random-effects model? And I should simply ignore the "V_b-V_B is not positive definite" ?


    Please find a screenshot of the test attached.
    Attached Files
    Last edited by Lea June; 20 May 2025, 11:13.

  • #2
    Lea:
    what does -xtest0- tell you?
    Kind regards,
    Carlo
    (Stata 19.0)

    Comment


    • #3
      Hi thank you for your answer, when I try to run this command it gives me "last estimates not xtreg, re" even though I test it for a fixed effect model I don't understand why. (I use Stata SE 18,5)
      Best,
      Lea

      Comment


      • #4
        .
        Last edited by Lea June; 21 May 2025, 04:54.

        Comment


        • #5
          Lea:
          -xtest0- works after -xtreg,re- only .
          Kind regards,
          Carlo
          (Stata 19.0)

          Comment


          • #6
            this is what it says Click image for larger version

Name:	Screenshot 2025-05-21 at 15.25.01.png
Views:	1
Size:	65.8 KB
ID:	1777786

            Comment


            • #7
              Lea:
              -xtest0- outcome tells you that the use of -re- estimator is not appropriate in your case.
              Last edited by Carlo Lazzaro; 21 May 2025, 08:50.
              Kind regards,
              Carlo
              (Stata 19.0)

              Comment

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