Name

Date
Cours: management
School

Analysis
 
Pooled OLS does not address the omitted variable bias problem.
 
In absence of homoskedasticity, POLS is not efficient. — apply robust errors
 
High error due to low period on period changes (e.g. 0/1 or age). Potential problems if variables do
not vary much over time.
 
[exp(-.422)-1= -.344], 34.4%. —— this is how you do level log (0.422 is the Beta)
 
Pooled OLS standard errors underestimate the true SE due to serial correlation. Just reported for
comparison.
 
“The marriage premium falls from 11% to 4.7%, when using FE rather than pooled OLS. This suggests
that half of the pooled OLS premium is due to married individuals would also earn more if they were
not married.” —— TRY TO APPLY THIS TO THE ASSIGNMENT BETAS
 
Strengths vs Weaknesses
 
Strengths:
 Bigger dataset
 Control for time invariant/unobserved effects
 Fix omitted variable bias to some degree
 Unobserved can be correlated with error
 
Weaknesses
 Amplifies ratio of noise to signal if there is a measurement error in X
 Doesn’t measure fixed characteristics
 Little variation in time for X may lead to large standard errors - similar to point 1
 Source of variation less clear???
 
http://www.montana.edu/cstoddard/562/Chapter14studentnotes.pdfhttp://www.montana.edu/cst
oddard/562/Chapter14studentnotes.pdf