Random-effects models are more appropriate than fixed-effects models when
A)the time invariant component of the error term is not correlated with one or more the independent variables.
B)dealing with panel data.
C)the error term is random.
D)the intercept is not constant.

Question

Quizplus · Accepted Answer

Random-effects models are suitable when the time-invariant component of the error term is not correlated with the independent variables, allowing for more efficient estimations compared to fixed-effects models.

Random-Effects Models Are More Appropriate Than Fixed-Effects Models When