Week 9B Flashcards
(7 cards)
1
Q
How does a first differencing remove Time invariant unobservables?
A
By taking the model in period 1 from the model in period 2, the fixed effects (a_i), are removed from the model
2
Q
When are fixed effects an issue?
A
When (a_i) is correlated with X_it
3
Q
Write out the two-period model and explain each regressor
A
4
Q
Write out the basic first differencing equation for 2 periods without the fixed effect. How do you achieve this and are there any omitted variables remaining
A
Take period 2 equation from period 1 equation. IE (y1-y2)
Yes omitted variabes can still exist, only fixed effects are removed
5
Q
A
6
Q
A
7
Q
A
