Stata Panel Data -

To check balance explicitly:

Use pooled OLS as a baseline, but rarely as a final model. Fixed effects removes all time-invariant unobserved heterogeneity by de-meaning the data. It answers: Within a worker, how does changing union status affect wage? stata panel data

xtreg wage experience union i.year, fe Already done above via i.year . This removes time trends common to all panels. When lagged dependent variables matter (e.g., wage depends on prior wage), standard FE is biased. Use Arellano-Bond GMM: To check balance explicitly: Use pooled OLS as

Why does this matter? Because panel data allows you to control for unobserved heterogeneity—the "invisible" variables that differ across entities but remain constant over time. For example, when studying the impact of education policy on test scores, panel data can control for inherent differences in school quality or regional culture that you cannot measure directly. xtreg wage experience union i

regress wage experience union i.year, vce(cluster id) Clustering at the panel level is standard practice in economics. Controlling for year-specific shocks:

: N=5,000 workers, T=6 years (2015-2020). Variables: wage , union , experience , educ (time-invariant), id , year .

xtserial wage union experience No serial correlation (p>0.05).