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Are Fixed Effects Fixed?

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  • Dwyer, Douglas W.
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    Abstract

    In attempts to overcome the problem of omitted variables, the assumption of fixed effects is widely implemented when working with panel data. This paper examines the validity of this technique, in the context of estimating a production function using panels of US textile plants. The hypothesis of fixed effects is tested by estimating a more flexible functional form for the error term's components than is found in the literature. It is shown that what looks loke a "fixed effect" is actually decaying slowly.

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    File URL: http://econ.as.nyu.edu/docs/IO/9382/RR97-35.PDF
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    Bibliographic Info

    Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 97-35.

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    Length: 24 pages
    Date of creation: 1997
    Date of revision:
    Handle: RePEc:cvs:starer:97-35

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    Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
    Phone: (212) 998-8936
    Fax: (212) 995-3932
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    Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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    Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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    Related research

    Keywords: PRODUCTIVITY ; EVALUATION;

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