Panel data allows you to control for variables you cannotobserve or measure like cultural factors (when comparingcountries or states within a country –i.e. Utah vs. NewYork) or difference in business practices acrosscompanies.Panel data also help to control for unobservable variablesthat change over time but not across entities (i.e. nationalpolicies, federal regulations, international agreements, etc.)With panel data you can include variables at different levelsof analysis (i.e. students, schools, districts, states) suitablefor multilevel or hierarchical modeling.
Note: For a comprehensive list of advantages and disadvantages of panel data see Baltagi,
Econometric Analysis of Panel Data