Carlos,

You could also possibly use a fixed effects vector decomposition procedure,
see Plumper, V., Troeger, V. E., 2007. Efficient estimation of
time-invariant and rarely changing variables in finite sample panel analyses
with unit fixed effects. Political Analysis, 15, 124-139.

Alternatively, if want to estimate random effects, the Hausman-Taylor
estimator might be useful to solve the problem Dan mentioned (i.e.
regressors correlated with unit-specific error terms).

Best,
Johan



> -----Original Message-----
> From: Political Methodology Society [mailto:[log in to unmask]] On
> Behalf Of Carlos Rodriguez
> Sent: Monday, January 19, 2009 5:46 PM
> To: [log in to unmask]
> Subject: [POLMETH] Fixed-effects and slow-moving variables
> 
> Dear list participants,
> 
> I have a basic question I'd be grateful if sb could clarify:  when
> using a coutnry FE model with TSCS data, should we one LEAVE OUT all
> control variables that do not change much over time?  Should one
> INCLUDE them but refrain from interpreting their coefficients?  I
> guess my question would be whehter including such slow-moving
> variables would bias or otherwise affect the estimates for the
> variables that do change over time.  Also, how much should a variable
> change over time to be fine to interpret it with FE and how to
> ascertain the magnituted of this change?
> 
> Thanks, as usual, and HAPPY 2009
> 
> **********************************************************
>              Political Methodology E-Mail List
>    Editors: Melanie Goodrich, <[log in to unmask]>
>             Delia Bailey, <[log in to unmask]>
> **********************************************************
>         Send messages to [log in to unmask]
>   To join the list, cancel your subscription, or modify
>            your subscription settings visit:
> 
>           http://polmeth.wustl.edu/polmeth.php
> 
> **********************************************************

**********************************************************
             Political Methodology E-Mail List
   Editors: Melanie Goodrich, <[log in to unmask]>
            Delia Bailey, <[log in to unmask]>
**********************************************************
        Send messages to [log in to unmask]
  To join the list, cancel your subscription, or modify
           your subscription settings visit:

          http://polmeth.wustl.edu/polmeth.php

**********************************************************