The fixed effects transformation Consider the following simple unobserved effects regression model for each i:
yit = β1xit + ai + uit
where
yit = value of the dependent variable for individual i at time t
xit = value of the independent variable for individual i at time t
ai = unobserved, time-constant effect
uit = idiosyncratic error
ai___over time. Therefore, the average value ofa; over time (-) is equal to___. So ai = ai - ai=. The IS constant fol presents the time-demeaned data on a variable, performing the fixed effects transformation on the original model yields which of the following varies?
aiover time. Therefore, the average value of ai over time (ai) is equal to. So bar ai = ai - bar ai.
Therefore, if___represents the time-demeaned data on a variable, performing the fixed effectinformation on the original model yields which of the following?
a. bar yit = β1 barxit + ai + uit
b. yit - yi = β1(xit - xi) + (uit - ui)
c. yit - yi = β1(xit - xi) - (uit - ui)
d. yit = β1xit + uit
Suppose, in the original unobserved effects model, xit = sat is the SAT score, (with the highest score used if there were multiple attempts)
β1 can be estimated by using the within transformation on the unobserved effects model and then using OLS.
A. True
B. False