Few notes on panel data (materials by Alan Manning). Development Workshop. A Brief Introduction to Panel Data. Panel Data has both time-series and cross-section dimension – N individuals over T periods
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Attenuation bias larger for RE than BE estimator as T>1>κ
The averaging in the BE estimator reduces the importance of measurement error.
Important to note that these results are dependent on the particular assumption about the measurement error process and the nature of the variation in xit – things would be very different if measurement error for a given individual did not vary over time
But general point is the measurement error considerations could affect choice of model to estimate with panel data