Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 6

Why can we not use first differences when we have independent cross sections in two years (as opposed to panel data)?

Step 1 of 2

When the same cross-sectional unit is observed over time across different parameters, the resultant dataset obtained is known as the Panel data and when different cross-sectional units are observed over time, then, the resultant dataset gives rise to the Pooled independent cross-sections across time.