To compare between fixed effects and random effects estimation, we use the Hausman test, which was introduced by Hausman (1978). Making a decision between fixed effects and random effects by the Hausman test is commonly used in most panel data studies. The null hypothesis of the Hausman test is the conditional mean of the error term given the independent variables is zero. Hence, if the Hausman test rejects this null hypothesis, we will use the fixed effect method. On the other hand, if the Hausman test cannot reject this null hypothesis, we will use random effects instead.