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Time-Invariant Variables’ Time-Varying Effects: Misinterpretations of the Fixed-Effects Model in Sociological Research

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  • Ren, Chunhui
  • Allison, Paul

Abstract

A popular statistical approach in sociological research, the fixed-effects regression model is known for its ability to produce unbiased coefficients by adjusting for unobserved time-invariant individual heterogeneity. This ability, however, is contingent on an often-overlooked assumption that time-invariant variables must not have time-varying effects, which, otherwise, would interfere in the process of coefficient estimation, leading to misinterpretations of the findings. Demonstrating with case studies, we intend to explain and clarify two types of such misinterpretations: (1) time-invariant variables’ time-varying effects, when measured in the model, are mistaken as time-invariant variables’ unbiased coefficient estimates; (2) time-invariant variables’ time-varying effects, when unmeasured in the model, confound coefficient estimates for time-varying variables.

Suggested Citation

  • Ren, Chunhui & Allison, Paul, 2024. "Time-Invariant Variables’ Time-Varying Effects: Misinterpretations of the Fixed-Effects Model in Sociological Research," OSF Preprints t6ndu, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:t6ndu
    DOI: 10.31219/osf.io/t6ndu
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    1. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    2. Mummolo, Jonathan & Peterson, Erik, 2018. "Improving the Interpretation of Fixed Effects Regression Results," Political Science Research and Methods, Cambridge University Press, vol. 6(4), pages 829-835, October.
    3. David A. Jaeger & Theodore J. Joyce & Robert Kaestner, 2020. "A Cautionary Tale of Evaluating Identifying Assumptions: Did Reality TV Really Cause a Decline in Teenage Childbearing?," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(2), pages 317-326, April.
    4. Melissa S. Kearney & Phillip B. Levine, 2015. "Media Influences on Social Outcomes: The Impact of MTV's 16 and Pregnant on Teen Childbearing," American Economic Review, American Economic Association, vol. 105(12), pages 3597-3632, December.
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