If, for instance, my dependent variable is some happiness index, and my independent variable is a dummy for whether they experienced some randomly occurred natural disaster. I am trying to analyze the effect of having experienced that disaster on the happiness index.
I am using a fixed effects model.
I have basically two interrelated questions:
What I read so far is that in regressions, control variables need to be correlated with both (primary) x and y variables. If that is the case I do not see a lot of variables that are correlated with both the disaster and happiness, besides:
- Wealth (the poor are affected more by the disaster; wealth is also correlated to happiness)
- Some disaster-induced variable like dummies for whether the disaster affected their water source, whether they had to live in a temporary shelter (tents), whether their livestock was killed, etc., which are all correlated with happiness. However, I also think that if I control for both of these factors, then I am controlling for the mechanism in which an individual's happiness could be affected by the disaster, i.e. taking away the effect of the earthquake-induced factors in the second point above. Am I thinking correctly?
Is it plausible to control for factors like age, education, etc.? These factors influence happiness (may even influence post-disaster happiness), but these variables like age are not directly correlated with whether they experienced disaster or not. Am I thinking correctly?