I am using panel data set and want to know which model I should use, fixed effect or random effect. On which basis is this selection done? When I asked my teacher he told me that model is selected on the base of Hausman specification test .
I am using the panel data for measuring the bilateral trade between two countries and to find out the effect of distance I am using panel data se otherwise I was using time series only. But only time series was not able to find out the impact of distance on bilateral trade between two countries..? I have read all the chapter of panel data of Gujarati book and still confused about model selection. I was thinking to run OLS on all the panel data set ignoring the cross sectional and time series...by doing this I will be able to get the impact of distance on bilateral trade also about other variables..