Panel data estimation can sometimes be used
A)to avoid the problems associated with misspecified functional forms.
B)in case the sum of residuals is not zero.
C)in the case of omitted variable bias when data on the omitted variable is not available.
D)to counter sample selection bias.

Question

Quizplus · Accepted Answer

Panel data estimation allows for the inclusion of individual-level fixed effects, which can control for the effects of unobserved individual-level characteristics that may be correlated with the outcome variable and omitted from the model. This helps to mitigate the problem of omitted variable bias when data on the omitted variable is not available. The other choices do not accurately describe the benefits of panel data estimation.

Panel Data Estimation Can Sometimes Be Used