Question: In the context of the regression you suggested for given Problem, explain why the regression error for a given individual might be serially correlated.
Problem: A researcher is using a panel data set on n = 1000 workers over T- 10 years (from 2001 through 2010) that contains the workers' earnings, gen-der, education, and age. The researcher is interested in the effect of education on earnings. Give some examples of unobserved person-specific variables that are correlated with both education and earnings. Can you think of examples of time-specific variables that might be correlated with education and earnings? How would you control for these person-specific and time-specific effects in a panel data regression?