Fixed-effects models and first-differenced models
A)assume that the time-invariant component of the error term is not correlated with the independent variables.
B)both add dummy variables to control for individual observations.
C)do not provide identical results if there are more than two years of data.
D)do not completely remove the time-invariant component of the error term.

Question

Quizplus · Accepted Answer

Fixed-effects models and first-differenced models do not provide identical results if there are more than two years of data because they handle the time-invariant component differently, leading to different estimates.

Fixed-Effects Models and First-Differenced Models