Deck 13: Pooling Cross Sections Across Time: Simple Panel Data Methods

Question 1

The average treatment effect measures _____.

A)the effect of a policy or program on the dependent variable
B)the effect of unobserved factors on observed explanatory variables
C) the effect of a change in an explanatory variable on other explanatory variables
D) the effect of unobserved factors on the average outcome of the dependent variable

Answer 1

A
Explanation: The average treatment effect measures the effect of a policy or program on the dependent variable.

Question 2

A regression model exhibits unobserved heterogeneity if _____.

A)there are unobserved factors affecting the dependent variable that change over time
B)there are unobserved factors affecting the dependent variable that do not change over time
C) there are unobserved factors which are correlated with the observed independent variables
D) there are no unobserved factors affecting the dependent variable

Answer 2

B
Explanation: A regression model exhibits unobserved heterogeneity if there are unobserved factors affecting the dependent variable but they do not change over time.

Question 3

Pooling independent cross sections across time is useful in providing precise estimators if _____.

A)the relationship between the dependent variable and at least some of the independent variables remains constant over time
B)the relationship between the dependent variable and at least some of the independent variables is linear
C) the relationship between the dependent variable and at least one of the independent variables changes over time
D) the relationship between the dependent variable and at least one of the independent variables is positive

Answer 3

A
Explanation: Pooling independent cross sections across time is useful in providing precise estimators if the relationship between the dependent variable and at least some of the independent variables remains constant over time.

Question 4

Which of the following assumptions is needed for the usual standard errors to be valid when differencing with more than two time periods?

A)The regression model exhibits heteroskedasticty.
B)The differenced idiosyncratic error or u_it is uncorrelated over time.
C) The unobserved factors affecting the dependent variable are time-constant.
D) The regression model includes a lagged independent variable.

Question 5

Which of the following is a reason for using independently pooled cross sections?

A)To obtain data on different cross sectional units
B)To increase the sample size
C) To select a sample based on the dependent variable
D) To select a sample based on the independent variable

Question 6

​Which of the following is an advantage of panel data?

A)​We can difference the dependent variable, y, across time for different cross-sectional units.
B)​We can add the dependent variable, y, across time for different cross-sectional units.
C) ​We can difference the dependent variable, y, across time for the same cross-sectional units.
D) ​We can add the dependent variable, y, across time for the same cross-sectional units.

Question 7

If a random sample is drawn at each time period, pooling the resulting random samples gives us a panel data set.

Question 8

The general approach to obtaining fully robust standard errors and test statistics in the context of panel data is known as _____.

A)confounding
B)differencing
C) clustering
D) attenuating

Question 9

Composite error is the error that occurs due to _____.

A)the incorrect measurement of explanatory variables
B)the inclusion of too many explanatory variables in the model
C) correlation between the independent variables
D) unobserved factors affecting a dependent variable

Question 10

A Chow test _____.

A)is used to test the presence of heteroskedasticty in a regression model
B)is used to determine how multiple regression differs across two groups
C) cannot detect changes in the slope coefficients of dependent variables over time
D) cannot be computed for more than two time periods

Question 11

Which of the following is true of a natural experiment?

A)A natural experiment occurs when some endogenous event changes the environment in which individuals, families, firms, or cities operate.
B)The control group in a natural experiment is randomly chosen.
C) The treatment group in a natural experiment is randomly chosen.
D) Control and treatment groups in a natural experiment arise due to an exogenous event.

Question 12

Ordinary least squares estimation is subject to heterogeneity bias if _____.

A)the regression model exhibits heteroskedasticty
B)the unobserved effect is correlated with the observed explanatory variables
C) the regression model includes a lagged dependent variable
D) the explanatory variables do not change over time

Question 13

Which of the following assumptions is required to obtain a first-differenced estimator in a two-period panel data analysis?

A)The explanatory variable does not change over time for any cross-sectional unit.
B)The explanatory variable changes by the same amount in each time period.
C) The variance of the error term in the regression model is not constant.
D) The idiosyncratic error at each time period is uncorrelated with the explanatory variables in both time periods.

Question 14

A data set is a balanced panel if it _____.

A)consists of a sample of individuals, households, firms, cities, states, countries, or a variety of other units, taken at a given point in time
B)consists of observations on a variable or several variables over time
C) consists of data for each cross sectional units over the same time period
D) consists of time-demeaned data for different cross sectional units

Question 15

​If each variable in a single cross-sectional equation is differenced over time, then it is called the:

A)​unobserved effects model.
B)​first-differenced estimator.
C) ​fixed effects model.
D) ​first-differenced equation.

Question 16

Idiosyncratic error is the error that occurs due to _____.

A)incorrect measurement of an economic variable
B)unobserved factors that affect the dependent variable and change over time
C) unobserved factors that affect the dependent variable and do not change over time
D) correlation between the independent variables

Question 17

The assumption of "strict exogeneity" in a regression model means that _____.

A)the dependent variable is binary
B)all explanatory variables change over time
C) the model does not include a lagged dependent variable as a regressor
D) the model includes all relevant explanatory variables

Question 18

First-differenced estimation in a panel data analysis is subject to serious biases if _____.

A)key explanatory variables vary significantly over time
B)the explanatory variables do not change by the same unit in each time period
C) one or more of the explanatory variables are measured incorrectly
D) the regression model exhibits homoscedasticity

Question 19

A natural experiment occurs when an endogenous event changes the environment in which individuals, families, firms, or cities operate.

Question 20

The systematic differences between the control and treatment groups can be controlled by taking two years data, _____.​

A)​one treatment group before policy change and one after the change
B)​one before the policy change and one after the change
C) one control group and one treatment group
D) ​one control group before policy change and one after the change

Question 21

In a natural experiment, the same cross-sectional units appear in each time period.

Question 22

First-differenced estimation gives unbiased estimators if the regression model includes a lagged dependent variable.

Question 23

A natural experiment always has a control group, which is affected by the policy change, and a treatment group, which is not affected by the policy change.

Question 24

One way of organizing two periods of panel data is to have only one record per cross-sectional unit.

Question 25

Two-period panel data is used for program evaluation and policy analysis.