Questions tagged [first-difference]

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GLS estimation procedure for the Random Effect model

Consider a simple panel regression model: $$y_{it}=\beta x_{it}+a_i+u_{it}=\beta x_{it}+\epsilon_{it}$$ where $\epsilon_{it}=a_i+u_{it}$ Question: I need to explain the fixed effects estimator and the ...
Thinh Pham's user avatar
2 votes
1 answer

Why include start-of-period values in first difference estimation?

I am currently reading the Paper of Dippel et al. (2015), where the authors estimate the causal effect of imports on voting behavior in Germany. Therefore, they estimate the following first-difference ...
Lea Birm's user avatar
1 vote
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Dummy variables are removed when estimating first-differences

I am currently getting ready for Econometrics 1 exam and I have some problems deriving the FD estimator sometimes. Lets say we have a data set with the following observations: $FoodAS_{it}$ = food ...
Zebraboard's user avatar
3 votes
2 answers

Fixed effects vs first difference

Or more generally, what are the reasons for the absolute dominance of the fixed effects estimators to control for unobserved heterogeneity in large N, short T panel settings? I get that random effects ...
Papayapap's user avatar
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