Which of the Following Assumptions Is Required to Obtain a First-Differenced

question 6

Multiple Choice

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.