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A researcher is interested in the effect of a US state having access to the ocean...

A researcher is interested in the effect of a US state having access to the ocean (a dummy variable AO) on the density of the population of that state. The density of the population can be a ected by many unobserved characteristics of the state including the preferences of the residents, which are hard to measure. To address this, the researcher decides to use panel data with state fixed effects. The researcher collects the data on the population density (PDit) and average yearly temperatures (YTit) for each year t between 2000 and 2012 for each of the US states i. The researcher then plans to run a panel data regression:

What is the main problem with this empirical strategy?

math   Statistics-And-Probability   
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