Question 1

Pooled cross-section models

Accepted Answer

A) control for individual fixed-effects. 
B) combine observations over many different years. 
C) control for unobserved heterogeneity. 
D) control for random-effects. 
A) control for individual fixed-effects. 
B) combine observations over many different years. 
C) control for unobserved heterogeneity. 
D) control for random-effects. B

Question 2

Treating each data point in panel data as an individual observation and not accounting for the fact that individuals are observed over many time periods is referred to as estimating a ____ model.

Accepted Answer

A) static time-series 
B) heteroskedastic consistent 
C) pooled cross-section 
D) fixed-effects 
A) static time-series 
B) heteroskedastic consistent 
C) pooled cross-section 
D) fixed-effects C

Question 3

Fixed-effects models and first-differenced models

Accepted Answer

A) assume that the time-invariant component of the error term is not correlated with the independent variables. 
B) both add dummy variables to control for individual observations. 
C) control for unobserved heterogeneity. 
D) do not completely remove the time-invariant component of the error term. 
A) assume that the time-invariant component of the error term is not correlated with the independent variables. 
B) both add dummy variables to control for individual observations. 
C) control for unobserved heterogeneity. 
D) do not completely remove the time-invariant component of the error term. C

Question 4

Random-effects models are

Accepted Answer

A) almost never the appropriate model in economics because the unobserved heterogeneity is typically correlated with the independent variables. 
B) typically more appropriate than fixed effects models in economics. 
C) preferred when the error term is random. 
D) difficult to interpret because the coefficient estimates are not true marginal effects. 
A) almost never the appropriate model in economics because the unobserved heterogeneity is typically correlated with the independent variables. 
B) typically more appropriate than fixed effects models in economics. 
C) preferred when the error term is random. 
D) difficult to interpret because the coefficient estimates are not true marginal effects.

Question 5

Panel data differs from time-series data in that panel data is observed

Accepted Answer

A) for a number of different individuals in a number of different time-periods. 
B) for a given individual in a number of different time-periods. 
C) for a number of different individuals in a given time-period. 
D) for a given individual in a given time-period. 
A) for a number of different individuals in a number of different time-periods. 
B) for a given individual in a number of different time-periods. 
C) for a number of different individuals in a given time-period. 
D) for a given individual in a given time-period.

Question 6

First-differenced models are preferable to pooled cross-section models because they

Accepted Answer

A) control for potential autocorrelation. 
B) control for potential heteroskedasticity. 
C) control for the random effects in the data. 
D) remove the time constant component in the error term. 
A) control for potential autocorrelation. 
B) control for potential heteroskedasticity. 
C) control for the random effects in the data. 
D) remove the time constant component in the error term.

Question 7

Suppose that in an effort to explain variation in wages,you collect a panel data set with 12,300 total observations over 3 different years with the independent variables as experience,education,married (dummy variable is 1 if married and 0 if not married)and male (dummy variable is 1 if male and 0 if female).
a)How do you estimate a random-effects model for these data? Explain in as much detail as possible.
b)What are the advantages of estimating a random-effects model?
c)What are the drawbacks of estimating a random-effects model for this scenario?

Accepted Answer

The first step to estimate a random effe

Question 8

What is a pooled cross-section model? For what type of data would you estimate such a model? Are there any potential empirical issues associated with this approach? Explain.

Accepted Answer

A pooled cross-section model is one in w

Question 9

If there is a pooled cross-section model with and intercept and five explanatory variables and there are 100 observations each year for three years

Accepted Answer

A) the sample size is 100. 
B) there are 294 degrees of freedom. 
C) the sample size is 294. 
D) there are 300 degrees of freedom. 
A) the sample size is 100. 
B) there are 294 degrees of freedom. 
C) the sample size is 294. 
D) there are 300 degrees of freedom.

Question 10

Random-effects models

Accepted Answer

A) assume that the time invariant component of the error term is not correlated with the independent variables. 
B) first difference the data. 
C) are impossible to estimate in STATA. 
D) can only be estimated if the panel data only have two time periods. 
A) assume that the time invariant component of the error term is not correlated with the independent variables. 
B) first difference the data. 
C) are impossible to estimate in STATA. 
D) can only be estimated if the panel data only have two time periods.

Question 11

One can first-difference panel data in a two-period model by subtracting

Accepted Answer

A) the previous-period observation from the current-period observation for the dependent variable. 
B) the previous-period observation from the current-period observation for the dependent variable and each independent variable. 
C) the current-period observation from the previous-period observation for the dependent variable and each independent variable. 
D) the current-period observation from the previous-period observation for the independent variable. 
A) the previous-period observation from the current-period observation for the dependent variable. 
B) the previous-period observation from the current-period observation for the dependent variable and each independent variable. 
C) the current-period observation from the previous-period observation for the dependent variable and each independent variable. 
D) the current-period observation from the previous-period observation for the independent variable.

Question 12

Pooled cross-section models are not the preferred estimators for panel data models because they

Accepted Answer

A) are heteroskedastic. 
B) are quasi-differenced. 
C) do nothing to account for the time constant component of the error term. 
D) create a dummy variable for each individual in the data set. 
A) are heteroskedastic. 
B) are quasi-differenced. 
C) do nothing to account for the time constant component of the error term. 
D) create a dummy variable for each individual in the data set.

Question 13

Suppose that in an effort to explain variation in wages,you collect a panel data set with 12,300 total observations over 3 different years and you estimate the following pooled cross-section model $$\begin{array} { lllll } 
 lo\widehat { g~wa}ge  _ { i , t } =& 10.374 +& 0.023 \text { Experience } _ { i , t } +& 0.104 \text { Education } _ { i , t } + &0.036 \text { Married } _ { i , t } \
& (1.592) &(0.002)&(0.034) &(0.004)\
\
&&&n = 12,300 \
&&&R ^ { 2 } = .3246 \
\end{array}$$ 
a)How many individuals are included in your sample in each of the three years? How do you know? Explain.
b)How do you interpret the estimated sample regression function? Explain.
c)What is a potential shortcoming associated with this model? Explain.
d)What would be the simplest way to address the issue raised in (b)? Why would this address the issue? Explain.

Accepted Answer

a)4,100 individuals are observed in each

Question 14

Fixed-effects models

Accepted Answer

A) remove the time-variant component of the error term. 
B) remove the time-invariant component of the error term. 
C) work by first-differencing the data. 
D) remove the heteroskedasticity in the data. 
A) remove the time-variant component of the error term. 
B) remove the time-invariant component of the error term. 
C) work by first-differencing the data. 
D) remove the heteroskedasticity in the data.

Question 15

What is panel data? How does it differ from cross-section data? Time-series data? Explain.

Accepted Answer

Panel data is data for a cross-section o

Question 16

Panel data differs from cross-section data in that panel data is observed

Accepted Answer

A) for a number of different individuals in a given time-period. 
B) for a given individual in a number of different time-periods. 
C) for a given individual in a given time-period. 
D) for a number of different individuals in a number of different time-periods. 
A) for a number of different individuals in a given time-period. 
B) for a given individual in a number of different time-periods. 
C) for a given individual in a given time-period. 
D) for a number of different individuals in a number of different time-periods.

Question 17

The biggest difference between fixed-effects and random-effects models is that

Accepted Answer

A) fixed effects models assume that the unobserved heteroskedasticity is uncorrelated with the independent variables. 
B) random effects models do not completely remove the time-invariant component of the error term. 
C) fixed effects models completely remove the time-variant component of the error term. 
D) random effects models are random while fixed-effects models are fixed. 
A) fixed effects models assume that the unobserved heteroskedasticity is uncorrelated with the independent variables. 
B) random effects models do not completely remove the time-invariant component of the error term. 
C) fixed effects models completely remove the time-variant component of the error term. 
D) random effects models are random while fixed-effects models are fixed.

Question 18

Fixed-effects models and first-differenced models

Accepted Answer

A) assume that the time-invariant component of the error term is not correlated with the independent variables. 
B) both add dummy variables to control for individual observations. 
C) provide identical results if there are only two years of data. 
D) do not completely remove the time-invariant component of the error term. 
A) assume that the time-invariant component of the error term is not correlated with the independent variables. 
B) both add dummy variables to control for individual observations. 
C) provide identical results if there are only two years of data. 
D) do not completely remove the time-invariant component of the error term.

Question 19

What is a first-differenced model? How is it preferable to a pooled cross-section model? Explain.

Accepted Answer

A first-differenced model is one in whic

Question 20

Fixed-effects models are more appropriate than random-effects models when

Accepted Answer

A) the error terms are autocorrelated. 
B) the independent variables are constant over time. 
C) the time invariant component of the error term is correlated with any of the independent variables. 
D) the error term is not constant. 
A) the error terms are autocorrelated. 
B) the independent variables are constant over time. 
C) the time invariant component of the error term is correlated with any of the independent variables. 
D) the error term is not constant.

Pooled cross-section models

Treating each data point in panel data as an individual observation and not accounting for the fact that individuals are observed over many time periods is referred to as estimating a ____ model.

Fixed-effects models and first-differenced models

Random-effects models are

Panel data differs from time-series data in that panel data is observed

First-differenced models are preferable to pooled cross-section models because they

What is a pooled cross-section model? For what type of data would you estimate such a model? Are there any potential empirical issues associated with this approach? Explain.

If there is a pooled cross-section model with and intercept and five explanatory variables and there are 100 observations each year for three years

Random-effects models

One can first-difference panel data in a two-period model by subtracting

Pooled cross-section models are not the preferred estimators for panel data models because they

Fixed-effects models

What is panel data? How does it differ from cross-section data? Time-series data? Explain.

Panel data differs from cross-section data in that panel data is observed

The biggest difference between fixed-effects and random-effects models is that

Fixed-effects models and first-differenced models

What is a first-differenced model? How is it preferable to a pooled cross-section model? Explain.

Fixed-effects models are more appropriate than random-effects models when

An Introduction to Econometrics and Statistical Inference

Collection and Management of Data

Summary Statistics

Simple Linear Regression

Hypothesis Testing in Linear Regression Analysis

Multiple Linear Regression Analysis

Qualitative Variables and Non-Linearities in Multiple Linear Regression Analysis

Model Selection in Multiple Linear Regression Analysis

Heteroskedasticity

Time Series Analysis

Auto-Correlation

Limited Dependent Variables

Instrumental Variables for Simultaneous Equations, Endogenous Independent Variables, and Measurement Error

Quantile Regression, Count Data, Sample Selection Bias, and Quasi-Experimental Methods

Filters

Exam 13: Panel Data

Pooled cross-section models

Treating each data point in panel data as an individual observation and not accounting for the fact that individuals are observed over many time periods is referred to as estimating a ____ model.

Fixed-effects models and first-differenced models

Random-effects models are

Panel data differs from time-series data in that panel data is observed

First-differenced models are preferable to pooled cross-section models because they

What is a pooled cross-section model? For what type of data would you estimate such a model? Are there any potential empirical issues associated with this approach? Explain.

If there is a pooled cross-section model with and intercept and five explanatory variables and there are 100 observations each year for three years

Random-effects models

One can first-difference panel data in a two-period model by subtracting

Pooled cross-section models are not the preferred estimators for panel data models because they

Fixed-effects models

What is panel data? How does it differ from cross-section data? Time-series data? Explain.

Panel data differs from cross-section data in that panel data is observed

The biggest difference between fixed-effects and random-effects models is that

Fixed-effects models and first-differenced models

What is a first-differenced model? How is it preferable to a pooled cross-section model? Explain.

Fixed-effects models are more appropriate than random-effects models when

An Introduction to Econometrics and Statistical Inference

Collection and Management of Data

Summary Statistics

Simple Linear Regression

Hypothesis Testing in Linear Regression Analysis

Multiple Linear Regression Analysis

Qualitative Variables and Non-Linearities in Multiple Linear Regression Analysis

Model Selection in Multiple Linear Regression Analysis

Heteroskedasticity

Time Series Analysis

Auto-Correlation

Limited Dependent Variables

Instrumental Variables for Simultaneous Equations, Endogenous Independent Variables, and Measurement Error

Quantile Regression, Count Data, Sample Selection Bias, and Quasi-Experimental Methods

Filters