New answers tagged statistics
1
Fixed effects model is estimated as:
$$ y_{i t} − \bar{y_i} = ( X_{i t} − \bar{X_i} ) \beta + ( \alpha_i − \bar{\alpha_i} ) + ( u_{it} − \bar{u_i} )$$
So the country fixed effect is always relative to the average fixed effect.
If a country has negative fixed effect that means it is less productive than average country in your sample. If you choose ...
3
The $E(u_i|X_i) = 0$ can hold even without having simple random sample or random assignment. However, random assignment guarantees this will hold (in expectations). A violation of $E(u_i|X_i) \neq 0$ is typically consequence of omitted variable bias. For example, in regression of education on wages reason why $E(u_i|X_i) \neq 0$ can be that experience also ...
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