Andrew Crane-Droesch
2014-Feb-22 00:50 UTC
[R] PLM falling into dummy variable trap -- how to fix?
**Appologies for cross-posting with Stack Overflow** An example of the problem: load(url('http://andrewcd.berkeley.edu/sdat')) head(sdat) library(plm) fem = plm(y~T+G:t,data=sdat,effect="twoways",model="within",index=c("ID","t")) summary(fem) lsdvm = lm(y~ID+T+G:t,data=sdat) summary(lsdvm) fem$coef `fem` is the fixed-effects model (fit with plm), and `lsdv` is the equivalent least-squares dummy variable model (fit with lm) It is clear that plm is estimating the coefficients, and indeed that the coefficients are identical in the two models, as they should be. But when I go to summarize the results, plm is having a hard time, and I'm pretty sure that the reason is the timeXgroup fixed effects, some of which need to be auto-omitted because of the dummy variable trap. (lm, for example, seems to know how to automatically remove variables that are exact linear combinations of each other). How do I get around this? I'd prefer to stay with plm, as it gives much more parsimonious output than lm with dummy variables for each cross-sectional unit. plm is also convenient for lags. Thanks, Andrew