Adding Time Fixed Effects (Fixed Effects)

Using mm.dta, let’s extend our models from the One-Way FE lecture.

• Ensure your data is xtset qnno tindex.
• Run a standard One-Way Fixed Effects model. Regress yield on fertilizer cost (totfertcostha) using xtreg, fe. Cluster standard errors at the qnno level.
• Run a standard Two-Way Fixed Effects model. Regress yield on fertilizer cost (totfertcostha) using xtreg, fe, but this time include time fixed effects by adding i.tindex to your list of covariates. Cluster standard errors at the qnno level.
• Now estimate the exact same model using the reghdfe command. Specify absorb(qnno tindex) to absorb both individual and time fixed effects. Cluster standard errors at the qnno level.

1. Use eststo to save each of the three results. Then adapt the table structure from the Exercise 1 to create a table of results heading columns with OWFE, TWFE, and reghdfe.
2. How do the estimates on totfertcostha compare across the three models? Did aggregate time shocks bias the one-way fixed effect estimator?

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