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

Chunhui Ren and Paul Allison

No t6ndu, OSF Preprints from Center for Open Science

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.

Date: 2024-09-18
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:t6ndu

DOI: 10.31219/osf.io/t6ndu

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