Which of the following is an advantage of panel data?
A)We can difference the dependent variable, y, across time for different cross-sectional units.
B)We can add the dependent variable, y, across time for different cross-sectional units.
C)We can difference the dependent variable, y, across time for the same cross-sectional units.
D)We can add the dependent variable, y, across time for the same cross-sectional units.

Question

​Which of the following is an advantage of panel data?
A)​We can difference the dependent variable, y, across time for different cross-sectional units.
B)​We can add the dependent variable, y, across time for different cross-sectional units.
C)​We can difference the dependent variable, y, across time for the same cross-sectional units.
D)​We can add the dependent variable, y, across time for the same cross-sectional units.

Quizplus · Accepted Answer

Panel data allows us to control for unobservable fixed effects and time-invariant characteristics of individual units, which is not possible with cross-sectional or time-series data alone. Differencing the dependent variable across time for the same cross-sectional units (option C) is an advantage of panel data because it allows us to control for time-invariant unit-specific factors. Adding the dependent variable across time for different cross-sectional units (option B) is not an advantage of panel data because it does not take into account variation within individual units over time.

​Which of the Following Is an Advantage of Panel Data

Which of the Following Is an Advantage of Panel Data