Hello!

I am trying to find the effect of drought on agricultural production using a model of the following form:
Array

I have panel data of the form:
Country Continent Year agprod drought
ABW LAC 1972 13413513 0
ABW LAC 1973 15213523 1
ABW LAC 1974 13513513 1
ADO WEOFF 1972 353413 0
ADO WEOFF 1973 234233 0


I have tried several specifications and progressively including country FEs, time FEs etc.

These are the results I get:

Array


I am now hesitating between model (4) and model (5).
Model (4) is a regression of ln_agprod on my drought indicator and adding country FEs and continent-year FEs. Model (5) is a regression of ln_agprod on my drought indicator with a linear country-specific time trend and both country FEs and year FEs.

My coefficient of interest is significant in both regressions I am thus hesitating which model to choose as my baseline. I am tempted to say model 4 is more simple and still accounts for unobserved heterogeneity and the fact that year effects may be different across regions.

Any thoughts?