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Time dummies in Unobserved Effects Models

Discussion in 'Education' started by Dutchman, Oct 8, 2018.

  1. Dutchman

    Dutchman Guest

    Wooldridge (2002, p. 129) says that with (independently) pooled cross sections over time, if 2SLS is applied and year dummies appear in the mode, the year dummies are their own instruments, as the passage of time is exogenous.

    How about in panel data settings? Are time period dummies always strictly exogenous in that they are uncorrelated with the error term for all time periods? The following is my current working on this problem.

    [​IMG] Thank you!

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