Random effects estimators require orthogonality between individual effects and regressors.
Is it true that random effects estimators require orthogonality between individual effects and regressors?
Yes. Random effects estimators in panel data and multilevel modeling conventionally assume that individual-specific effects are orthogonal to the regressors; relaxing this assumption requires specific correlated random effects approaches.
Verdict: SUPPORTED · 2 sources for, 0 against · Last checked
The retrieved papers support the claim that standard random effects models assume independence (orthogonality) between individual effects and regressors, and that violations of this assumption lead to endogeneity or require specialized correlated random effects models.
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Antonakis, J., Bastardoz, N., & Rönkkö, M. (2019). On Ignoring the Random Effects Assumption in Multilevel Models: Review, Critique, and Recommendations. doi.org. https://doi.org/10.1177/1094428119877457
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Li, L. & Yang, Z. (2020). Spatial dynamic panel data models with correlated random effects. doi.org. https://doi.org/10.1016/J.JECONOM.2020.05.016
What does the evidence say?
The retrieved papers support the claim that standard random effects models assume independence (orthogonality) between individual effects and regressors, and that violations of this assumption lead to endogeneity or require specialized correlated random effects models.
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