Consider the following unobserved effects model: Yit =B₁xit1+...+Bkitk + ai + Uit You plan on using fixed effects to estimate the model. Suppose you have a panel data set consisting of 10 individuals over 6 years. However, you are missing the last 3 years of data for the third, i = 3, Individual in your data set. Your panel data set has total observations. Suppose the reason individual i is missing data for certain time periods (called attrition) is correlated with the idiosyncratic error, uit. Recall that ai is assumed to be uncorrelated with the idiosyncratic error, uit. This correlation cause the fixed effects estimators to be biased.

Consider the following unobserved effects model: Yit =B₁xit1+...+Bkitk + ai + Uit You plan on using fixed effects to estimate the model. Suppose you have a panel data set consisting of 10 individuals over 6 years. However, you are missing the last 3 years of data for the third, i = 3, Individual in your data set. Your panel data set has total observations. Suppose the reason individual i is missing data for certain time periods (called attrition) is correlated with the idiosyncratic error, uit. Recall that ai is assumed to be uncorrelated with the idiosyncratic error, uit. This correlation cause the fixed effects estimators to be biased.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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