A fixed effects model is one in which the data generating process includes:
A) controls for cross-sectional groups.
B) controls for heteroscedasticity.
C) some control variables (e.g., Income) that vary over time.
D) a selected sample of cross-sectional units.

Question

Quizplus · Accepted Answer

A fixed effects model includes controls for cross-sectional groups, also known as panel or individual-specific effects. These controls allow us to isolate the impact of variables that vary within individuals or entities over time. The other options listed are not necessary components of a fixed effects model.

A Fixed Effects Model Is One in Which the Data