Dear all,
I have a newbie question here. sorry for this.
I have a panel data with variable Y and X for two units for example.
unit year X Y
1 1991 1 20
1 1992 2 19
1 1993 3 21
2 1991 10 40
2 1992 11 40
2 1993 11 39
That is, there is a larger cross variation than within variation
As i understand, FE only address the variation within units. So, if I
use FE, i will not find a significant relationship between x and y
based on the nature of the hypothectical data.
but this finding does not take into account the fact Y takes higher
vaue in unit 2 because x takes higher value in that unit. That is, fe
failed to represent the across-variation.
Is my understanding correct?
Sorry for this simple question.
best
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