Question 1:

A researcher believes that traffic fatalities increase when roads are cold and icy and thinks that therefore states that are colder will have more fatalities than other states. Comment on the following methods designed to estimate the effect of snow on fatalities:

a. The researcher collects data on the average temperature for each state and adds this regressor (AverageT empi) to the regression estimated two-way fixed effect: F atalityRateit = BeerT axit + DrinkingAgeit + vi + λt + uit

b. The researcher collects data on average temperature in each state for each year in the sample (AverageT empit) and adds this regressor to the regression in part (a).

c. The researcher collects data on temperature anomalies (difference between the annual temperature and the long-run average in that state) for each year in the sample (T empAnomalyit) and adds this regressor to the regression in part (a).