Generally speaking, what are the methods available to the econometrician who wants to estimate a linear model with a fixed effects model design (i.e., dummy variable for individual units observed over multiple periods)?
A) Within Estimator and Fixed Effects regression
B) Diff-in-diff and Two-stage least squares
C) Two-stage least squares and Fixed Effects regression
D) Within estimator and instrumental variable regression

Question

Quizplus · Accepted Answer

The methods available to the econometrician who wants to estimate a linear model with a fixed effects model design are Within Estimator and Fixed Effects regression. Within estimator, also known as the "residual" method, subtracts the time-invariant individual effects from the data and then estimates the parameters on the transformed data. Fixed Effects regression includes a dummy variable for each of the individual units observed over multiple periods, and then estimates the parameters on the transformed data. While other methods, such as Diff-in-diff, Two-stage least squares, and instrumental variable regression can be useful in other contexts, they are not directly applicable to a linear model with a fixed effects model design.

Generally Speaking, What Are the Methods Available to the Econometrician