Questions tagged [first-difference]

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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 ...
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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 ...
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