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?

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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. 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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Given that Consider the binary variable version of the fixed effects model expect wit... View the full answer