Question: Consider the binary variable version of the fixed effects model in Equation ( 1 0 . 1 1 ) except with an additional regressor, D

Consider the binary variable version of the fixed effects model in Equation(10.11) except with an additional regressor, D1i; that is, letYit = b0+ b1Xit + g1D1i + g2D2i + g + gn Dn i + u it.a. Suppose that n =3. Show that the binary regressors and the constantregressor are perfectly multicollinear; that is, express one of the variablesD1i, D2i, D3i, and X0,it as a perfect linear function of the others, whereX0,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 regressionby OLS?

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