Fixed effect models otherwise known as least squares dummy variable regression model was applied to the study of the compensation of employee function. The estimates were compared with ordinary least squares (OLS) estimator. The evaluation criteria for the estimated models are; R-square, F-ratio and restricted F-test. The results showed that the coefficients of the explanatory variables, excluding indirect taxes positively explained compensation of employee. It also revealed that the coefficients of the explanatory variables excluding consumption of fixed capital play significant role in determining what should be paid as compensation to employee who suffer injuries or loses. The restricted F-test for the estimators showed that compensation function has not changed much across the sectors but that it has changed much more over the years.
Keywords
Panel Data, Fixed Effect, Least Square Dummy Variable
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