Panel data with Sector year fixed effects on R

Question

I am trying to replicate the following econometric equation from the paper "How do french manufacturing firms react to Energy shocks ?"

s denotes sectors,i denotes firms, and t denotes year. The paper uses panel data. As you see it has $\phi_i$ for firms fixed effects. I know how to implement such in R, I would use the following code:

model1 <- plm(log(Panel$Prices)~ log(Panel$Electricity.pricr)+log(Panel$Gaz.Price)+
          data=Panel, index= c("Secteur","Date"), model="within",effect= "individual")

The command effect= "individual" enables me to have firm fixed effect.

However the paper includes also sector-year fixed effects $\chi_{st}$. But I do not know how to implement a fixed effect that plays on two variable at the same time: s and t. Do you know how I could implement it in R ?

Thank you

Answer 1

Here is a sketch of the code:

1. Concatenate the sector and year, so it reads as "energy1987" or so. They should be unique.
2. Encode this concatenated vector as a collection of binary dummies.
3. Use this set of dummies in the regression.

But given a choice about reinventing the wheel, use the existing tools.