Question: 10.2 Consider the binary variable version of the fixed effects model in Equation (10.11) except with an additional regressor, D1i; that is, let Yit =

10.2 Consider the binary variable version of the fixed effects model in Equation

(10.11) except with an additional regressor, D1i; that is, let Yit = b0 + b1Xit + g1D1i + g2D2i + g+ gnDni + uit.

a. Suppose that n = 3. Show that the binary regressors and the “constant”

regressor are perfectly multicollinear; that is, express one of the variables D1i, D2i, D3i, and X0,it as a perfect linear function of the others, where X0,it = 1 for all i, t.

b. Show the result in

(a) for general n.

c. What will happen if you try to estimate the coefficients of the regression by OLS?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Econometrics Questions!

Consider the binary variable version of the fixed effects model in Equation (10.11) except with an additional regressor, \(D 1_{i}\); that is, let \[ Y_{i t}=\beta_{0}+\beta_{1} X_{i t}+\gamma_{1} D...

Consider the binary variable version of the fixed effects model in Equation (10.11), except with an additional regressor, D1, that is, let Y Bo+BXYD1, + y2D2, ++yDn; +u.. a. Suppose that n=3. Show...

10.2 Consider the binary variable version of the fixed effects model in Equation (10.11), except with an additional regressor, D1i; that is, let Yit = b0 + b1Xit + g1D1i + g2D2i + g+ gnDni + uit. a....

2. Consider the binary variable version of the fixed effects model in the following equation, Yit=0+1Xit+2D2i+3D3i++nDni+uit, except with an additional regressor, D1i; that is, let...

Consider the binary variable version of the fixed effects model in Equation ( 1 0 . 1 1 ) except with an additional regressor, D 1 i; that is , letYit = b 0 + b 1 Xit + g 1 D 1 i + g 2 D 2 i + g + gn...

13.7 Suppose that you have panel data from an experiment with T = 2 periods (so t = 1, 2). Consider the panel data regression model with fixed individual and time effects and individual...

Exercises Chapter 2 2.1 Marginal and conditional probability: The social mobility data from Section 2.5 gives a joint probability distribution on (Y1 , Y2 )= (father's occupation, son's occupation)....

12334414355556 We have a dataset containing information on earnings of male and female top executives. Consider a binary variable Male which takes value 1 if the person is male, and value 0 if the...

Consider a binary variable Markov Random Field \ ( p ( \ mathbf { x } ) = Z ^ { - 1 } \ prod _ { i > j } \ phi ( x _ i , x _ j ) \ ) , defined on the \ ( n \ times n \ ) lattice with \ ( \ phi ( x _...

3.(2+3 5 pt) Consider the binary variable Y defined for individual family homes in the USA which is 1 if the home has a solar heating system, and 0 if it does not. A researcher has used LOGIT to...

which of the following variable name prefixes do we use in this book for variables that reference forms?a. frb. frmc. ford. fm2. when this type of form is displayed, no other form in the application...

3. Which of the following statements is true of part-time employees? a. Anti-discrimination laws enable part-time employees to receive the same benefits as full-time employees are offered. b. Most...

There's a risk of prolonged fund raise, use the points below to write a mitigant Equality Asset Management's fundraise for Fund II appears to be progressing well, with several key points to note: -...

What do you think is your strongest component of cultural intelligence? Your weakest? How would you go about shoring up your weaknesses?