Your Textbook Suggests an "Entity-Demeaned" Procedure to Avoid Having to Specify

question 37

Essay

Your textbook suggests an "entity-demeaned" procedure to avoid having to specify a
potentially large number of binary variables.While it is somewhat tedious to specify a
binary variable for each entity, this can still be handled relatively easily in the case of the
48 contiguous states.Give a few examples where it might be close to impossible to
implement specifying such large number of entity binary variables.The idea of the
"entity-demeaned" procedure was introduced as a computationally convenient and
simplifying procedure.Since there are also time fixed effects, why is there no discussion
of using a "time-demeaned" procedure? Using the following equation $$Y _ { i t } = \beta _ { 0 } + \beta _ { 1 } X _ { i t } + \beta _ { 3 } S _ { t } + u _ { i t } ,$$ $$\text { Show how } \beta _ { 1 } \text { can be estimated by the OLS regression using "time-demeaned" variables. }$$

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Definitions:

Pattern-matching Techniques

Methods used to compare empirical patterns with predicted ones to increase the validity of research findings.

Causal Explanation

The analysis or reasoning given to understand why something happened, identifying causes and effects in a logical sequence.

Plurality of Influences

The concept that multiple factors simultaneously affect outcomes in social, political, or personal contexts.

Explanatory Case Study

A comprehensive analysis used to investigate the underlying causes and effects of a particular event, situation, or phenomenon.