Question

True or False:

a. ( ) One advantage of fixed effects estimation is that inferences are more robust to measurement error in the explanatory variables of interest compared with OLS estimation.

b. ( ) The consistency of Fixed Effects estimators relies on weaker (more realistic) assumptions than those required for consistency of the Random Effects estimator. In this sense, we can say that Fixed Effects estimation is more robust than Random Effects estimation.

c. ( ) Estimating a model using the Within Estimator is equivalent to estimating the same model using the OLS Estimator after all variables have been transformed through time-demeaning.

d. ( ) Assumptions about the time series dimension are never necessary for the validity of panel data methods.

Answer 1

a. This is true that One advantage of fixed effects estimation is that inferences are more robust to measurement error in the explanatory variables of interest compared with OLS estimation, because OLS is gives best linear unbiased estimation of parameters.

b.this is false that The consistency of Fixed Effects estimators relies on weaker (more realistic) assumptions than those required for consistency of the Random Effects estimator. In this sense, we can say that Fixed Effects estimation is more robust than Random Effects estimation.

c. This is false that Estimating a model using the Within Estimator is equivalent to estimating the same model using the OLS Estimator after all variables have been transformed through time-demeaning.

d. This is false that the Assumptions about the time series dimension are never necessary for the validity of panel data methods.