This question assumes that you have access to a statistical package the computes standard errors robust to arbitrary serial correlation and heteroskedasticity for panel data methods.
(i) For the pooled OLS estimates in Table 14.1, obtain the standard errors that allow for arbitrary serial correlation (in the composite errors, vit = ai + uit) and heteroskedasticity. How do the robust standard errors for educ, married, and union compare with the non robust ones?
(ii) Now obtain the robust standard errors for the fixed effects estimates that allow arbitrary serial correlation and heteroskedasticity in the idiosyncratic errors, uit. How do these compare with the non robust FE standard errors?
(iii) For which method, pooled OLS or FE, is adjusting the standard errors for serial correlation more important? Why?