A researcher investigates the determinants of crime in the United Kingdom using data for 42 police regions over 22 years. She estimates by OLS the following regression:
ln(CMRTit)= Ai + Pt + B1*UNRTMit + B2*PROYTHit + B3*ln(PPit) + Uit
for i = 1,...,42 and t = 1,...,22 . The variable CMRT is the crime rate per head of population, UNRTM is the unemployment rate of males, PROYTH is the proportion of youths, and PP is the probability of punishment measured by the (number of convictions) ÷ (number of crimes reported). The Ai and Pt are region and year fixed effects, respectively, where Ai equals one for region i and zero otherwise for all i, and Pt is one in year t and zero otherwise for years t = 2, ..., 22. Note that P1 is not included.
Discuss the advantages of using panel data for this type of investigation.