Panel Regression is a statistical method used to analyze data that involves multiple entities (such as individuals, companies, or countries) over multiple time periods. This approach combines cross-sectional and time-series data, allowing researchers to control for unobserved heterogeneity among entities, which might bias the results if ignored. One of the key advantages of panel regression is its ability to account for both fixed effects and random effects, offering insights into how variables influence outcomes while considering the unique characteristics of each entity. The basic model can be represented as:
where is the dependent variable for entity at time , represents the independent variables, and denotes the error term. By leveraging panel data, researchers can improve the efficiency of their estimates and provide more robust conclusions about temporal and cross-sectional dynamics.
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