You Want to Find the Determinants of Suicide Rates in the United

Essay

You want to find the determinants of suicide rates in the United States.To investigate the
issue, you collect state level data for ten years.Your first idea, suggested to you by one of
your peers from Southern California, is that the annual amount of sunshine must be
important.Stacking the data and using no fixed effects, you find no significant
relationship between suicide rates and this variable.(This is good news for the people of
Seattle.)However, sorting the suicide rate data from highest to lowest, you notice that
those states with the lowest population density are dominating in the highest suicide rate
category.You run another regression, without fixed effect, and find a highly significant
relationship between the two variables.Even adding some economic variables, such as
state per capita income or the state unemployment rate, does not lower the t-statistic for
the population density by much.Adding fixed entity and time effects, however, results in
an insignificant coefficient for population density.
(a)What do you think is the cause for this change in significance? Which fixed effect is
primarily responsible? Does this result imply that population density does not matter?