Question: 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?

Consider the dummy variable version of the fixed effects models, except with

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?

Consider the dummy variable version of the fixed effects models, except with the intercept added in; that is, let Yi = Po + Poy +a, D1, +a,D2, +.. A, DN; +u, , where Dj =1 if j = i and =0 otherwise. a. Suppose that N=3. Show that the binary regressors and the "constant" regressor are perfectly multicollinear, that is, express one of the variables DI,, D2,, D3, and x as a perfect linear function of the others, where x =1 for Xo,it all i, t.

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