10.7 Suppose a researcher believes that the occurrence of natural disasters, such as earthquakes, leads to increased activity in the construction industry.

The researcher decides to collect province-level data on employment in the construction industry of an earthquake-prone country, and regress this variable on an indicator variable that equals 1 if an earthquake took place in that province in the last five years.

a. Should the researcher include province fixed effects in order to control for location-specific characteristics of the labor market?

b. What can the researcher do to control for location effects?