First-differences is used to solve the problem of... Time-constant unobserved factors that would otherwise create an endogeneity problem. Heteroskedacticity. Parallel trends. A failure of the assumption of "linearity in parameters".

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter1: Introduction: What This Book Is About
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First-differences is used to solve the problem of...

   

Time-constant unobserved factors that would otherwise create an endogeneity problem.

   

Heteroskedacticity.

   

Parallel trends.

   

A failure of the assumption of "linearity in parameters".

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