Question

Fixed Effects Application Balanced data on 51 US states from 1977 to 1993 Dependent variable - Invio logarithm of violent crime rate Regressors: shall dummy if state has a shall-carry law in effect incarc rate incarceration rate in the state in the previous year . density - population per square mile of land area avginc real per capita personal income . pm 1029-% of state population as male (ages 10 to 29) . pw1064-% of state population as white (ages 10 to 64) . pb1064-% of state population as black (ages 10 to 64)

What does this mean and how is this data balanced?? Please help.

Answer 1

Fixed effects are variables that are constant across individuals; these variables, like age or sex, don’t change or change at a constant rate over time. They have fixed effects; in other words, any change they cause to an individual is the same. For example, any effects from being a woman, a person of color, or a 17-year-old will not change over time.

In balance data, we observe every single value in every year. For example, observe every single state has crime rate in all years from 1977 - 1993. However, if we observed some of the states inthe year 1990 but not all of them, then we would call it an ‘unbalanced data set’ (this distinction oftenisn’t very important).