I'm running some regression models with panel data from Brazilian municipalities (N = 64,708, Number of groups = 5,561, T = 3).
The results seem ok at first, but:
1. The overall R2 is almost null: 0.0008
2. rho = .9917
3. corr(u_i, Xb) = -0.9928
What do these pieces of information suggest about the convenience of running FE models versus running pooled OLS?
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