Use the data in RENTAL for this exercise. The data for the years 1980 and 1990 include rental prices and other variables for college towns. The idea is to see whether a stronger presence of students affects rental rates. The unobserved effects model is log1rentit 2 5 b0 1 d0y90t 1 b1log1popit 2 1 b2log1avgincit 2 1 b3pctstuit 1 ai 1 uit, where pop is city population, avginc is average income, and pctstu is student population as a percentage of city population (during the school year).

(i) Estimate the equation by pooled OLS and report the results in standard form. What do you make of the estimate on the 1990 dummy variable? What do you get for b^

pctstu?

(ii) Are the standard errors you report in part (i) valid? Explain.