Problem 1. Consider the following binary variable version of the fixed effects model. Each regressor is a binary variable that equals 1 when i = j and 0 otherwise. Note that the binary variable for the first group is arbitrarily omitted. Yit Bo + B₁Xit +Y2D2i +...+YnDni + Uit, for i= 1,..., n, and t = 1,..., T. What is the stope and intercept for entity 3 in period 1? hat is the stope and intercept for entity 2 in time period 3? hat is the slope and intercept for entity 1 in time period 3? (d) How many different intercepts does this model have?

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Problem 1. Consider the following binary variable version of the fixed effects model. Each regressor
is a binary variable that equals 1 when i = j and 0 otherwise. Note that the binary variable for the
first group is arbitrarily omitted.
Yit = Bo + B₁Xit + √2D2i+ · + YnDni + Uit,
1, ..., T.
for i = 1,..., n, and t
-
period 1?
e stope and intercept for entity 2 in time posied 3?
hat is the slope and intercept for entity 3 in
✓ Hat is the
What is the stope and intercept for entity 1 în time peod 3?
(d) How many different intercepts does this model have?
[
(e) Comment on what will happen if you estimate the model including D1, in STATA.
Transcribed Image Text:Problem 1. Consider the following binary variable version of the fixed effects model. Each regressor is a binary variable that equals 1 when i = j and 0 otherwise. Note that the binary variable for the first group is arbitrarily omitted. Yit = Bo + B₁Xit + √2D2i+ · + YnDni + Uit, 1, ..., T. for i = 1,..., n, and t - period 1? e stope and intercept for entity 2 in time posied 3? hat is the slope and intercept for entity 3 in ✓ Hat is the What is the stope and intercept for entity 1 în time peod 3? (d) How many different intercepts does this model have? [ (e) Comment on what will happen if you estimate the model including D1, in STATA.
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