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Thread: Panel probit model (RE) -- inclusion of time invariant variables

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    Panel probit model (RE) -- inclusion of time invariant variables




    Hello forum members!

    Consider a panel probit model to be estimated (say, in Stata code):

    -xtprobit y x1 x2 x3 x4, re-

    where, y is binary time-variant (2009-2013), x2 and x3 are time-variant (2009-2013), and x3 and x4 are time-invariant. Regressors are all continuous in nature (data to match other years is simply not available). "Random effects" is a default specification for xtprobit in Stata.

    Additionally, rho is not zero in my case, so I assume that the panel-level variance component is important.

    Is it meaningful at all to add time-invariant predictors in the panel model like the above, considering that RE models will estimate the effects of time-invariant variables, but the estimates may be biased because I am not controlling for omitted variables as in FE.

    Thankfully,
    kiton
    Last edited by kiton; 07-20-2015 at 06:27 PM.

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