Which of the Following Is a Difference Between a Fixed

question 21

Multiple Choice

Which of the following is a difference between a fixed effects estimator and a first-difference estimator?

• A)The fixed effects estimators are always larger than the first difference estimators in a two-period panel data analysis.
• B)The fixed effects estimator is more efficient than the first-difference estimator when the idiosyncratic errors are serially uncorrelated.
• C)The first difference estimator is more sensitive to nonnormality and heteroskedasticity.
• D)The bias in the first difference estimator depends on the time period (T) of analysis while the bias in the fixed effect does not depend on T.

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Definitions:

Minimum Wage

Minimum wage is the lowest legal remuneration that employers are allowed to pay their workers, established by government laws.

Quantity Demanded

The total amount of a good or service that consumers are willing to buy at a given price level in a given period.

Labor

The human effort, both physical and mental, used to produce goods and services.

Equilibrium Wage

The wage rate at which the quantity of labor employers are willing to hire equals the quantity workers are willing to supply, with no excess demand or supply.