A pooled OLS estimator that is based on the time-demeaned variables is called the _____.
A)random effects estimator
B)fixed effects estimator
C)least absolute deviations estimator
D)instrumental variable estimator

Question

Quizplus · Accepted Answer

The time-demeaned variables are a characteristic of the fixed effects estimator, which is also known as the within estimator. The within estimator eliminates the time-invariant unobserved heterogeneity by subtracting the mean of each individual's variable from its observations. Therefore, the pooled OLS that is based on time-demeaned variables is a fixed effects estimator.

A Pooled OLS Estimator That Is Based on the Time-Demeaned