Consider estimating the effect of a beer tax on the fatality rate, using time an

Question

Consider estimating the effect of a beer tax on the fatality rate, using time and state fixed effect for the Northeast Region of the United States (Maine, Vermont, New Hampshire, 17. Massachusetts, Connecticut and Rhode Island) for the period 1991-2001. If a dummy for the Beer Tax was the only treatment variable, how many more parameters would you have to estimate by including dummies for time and state fixed effects versus differencing the data by their state-specific means (while still including the time dummies)?

Explanation / Answer

The correct answer for this problem is 17.

That is there is 17 parameter need to estimate by including dummies for time.

Hope this will help you. Thank you

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