Questions tagged [fixed-effects]

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In a one-way fixed effect model, why do we say that the demeaned variable has reduced variation?

Suppose $X_{it}^*$ is the demeaned version of $X_{it}$, i.e., $$X_{it}^* = X_{it}- \bar{X}_i$$ In Hansen's econometrics textbook, he says the demeaned variable has reduced variation relative to the ...
Mondayisgood's user avatar
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GLS estimation procedure for the Random Effect model

Consider a simple panel regression model: $$y_{it}=\beta x_{it}+a_i+u_{it}=\beta x_{it}+\epsilon_{it}$$ where $\epsilon_{it}=a_i+u_{it}$ Question: I need to explain the fixed effects estimator and the ...
Thinh Pham's user avatar
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Parallel trends in Fixed Effects

I am reading a very interesting article by Ray and Pullabholta (2023). They start from the observation that adoption of groundwater wells - which are a necessary input to agricultural productivity, ...
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Can hausman test imply slope heterogeneity?

I am working with panel data, and the Hausman test gave a p-value of 0.0001. From this, can I infer that there is significant heterogeneity of intercepts across entities of my panel? Im thinking so ...
Krishnendu's user avatar
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Individual level covariates used in this difference-in-difference paper: a mistake?

This paper uses a differece-in-differences (DID) approach to assess the effect of adding quizzes and assignments on exam grades. The data come from 3 different sections that one of the authors taught, ...
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Different estimates from 2SRI and fixed effects regression. is this endogeneity?

I am comparing two different models to resolve potential endogeneity concerns in my empirical models. First, I ran fixed-effects models without handling any endogeneity concerns, and I got significant ...
Sean Park's user avatar
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Event study with individual fixed effects

Suppose we have a treatment that varies at the group level before and after some t, where g is rather small with a couple of categories. Would we estimate an event study with group or individual fixed ...
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Panel data with Sector year fixed effects on R

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....
BAL's user avatar
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What is the difference between fixed effect regression and (panel) fixed effect regression?

What's the difference between fixed effect regression and (panel) fixed effect regression?
desi arthshastri's user avatar
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When should I NOT control for unit-fixed effects?

I see most of the applied econometrics papers using the two-way fixed effects model, controlling for time and units fixed effects, so: $$y_{it}=\alpha_{i}+ \gamma_{t} +\beta x_{it} +\epsilon_{it}$$ I ...
Oalvinegro's user avatar
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unobserved heterogeneity and time fixed effects

I understand that if there are correlated effects i.e. (one of) our explanatory variables are correlated with unobserved heterogeneity $\alpha_{i}$ then there will be omitted variable bias. Because ...
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fix cost and variable cost calculations

Can someone explain why? I do not particularly understand. The average variable cost is $5, and I need the variable cost to calculate the fixed cost
Angels Vásquez's user avatar
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IV - Is this correct?

I have the following question. Currently I have an econometric model that uses an instrumental variable, particularly a Bartik instrument (which some people call shift-share). I'm proceding as Mayda ...
Nacho's user avatar
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Should we use the firm and industry fixed effects together?

I am wondering if we can use the firm and industry fixed effects together in a regression (panel data). In particular, in a regression, whether we should use such a code in STATA ...
Phil Nguyen's user avatar
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Fixed time effects or fixed individual effects?

I have the following question or problem. I am currently using panel data to predict the hourly wage. I have only used the variable "union" as an influence variable from the initial model, ...
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How to estimate a subclass effect of fixed effect model?

i need help with an econometric question. I have a panel data of stock analysts and their associated investment returns by following their investment recommendations of buy/hold/sell. The data is at ...
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Suitable econometric specification for my data

I'm playing around with my dataset and as a start, I want to understand whether the absenteeism and vaccination rates for employees across a large number of factories with separate units is dependent ...
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On adding fixed effects

Let $Y_{ijst}$ be some outcome variable of firm $i$ of industry $j$, located in state $s$, at time $t$. Normally, if we want to run any differences-in-differences specification where treatment varies ...
virtue_signal's user avatar
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Pooled OLS, fixed effects and random effects yield very similar results

I have used pooled OLS, fixed effects and random effects to estimate a model and the results are as expected. I expected coefficients to differ quite significantly for the different techniques and ...
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Cross validation as a means of validating fixed effects?

To test whether it is appropriate to even use certain types of fixed effects, would it ever be appropriate to use a cross-validation methodology? Let's say that I have this type of mental model: $$\...
Daycent's user avatar
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Fixed Effects with lagged dependent variable, how is the average calculated?

Suppose we have a panel of data in which we observe $N$ individuals for $T$ time periods. We want to estimate: $$y_{it}= \delta y_{it-1}+x_{it}'\beta +\alpha_i +v_{it} $$ where $\alpha_i$ is a time-...
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When we should use SIC2 and SIC3 in fixed effect?

SIC is the industry classification. The definition of SIC from Bigelli, 2006 is Due to the low numbers of firms in some industries, we use the most detailed industry (SIC4) only if the number of ...
Phil Nguyen's user avatar
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How to deal when absorbed variables/FEs are collinear?

When using did_imputation (a Difference-in-Difference approach following Borusyak, 2021), I faced this problem Could not run imputation for some observations because some absorbed variables/FEs are ...
Phil Nguyen's user avatar
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Difference between "cohort fixed effects and state fixed effects" and "cohort and state fixed effects"?

This question is based on an earlier question of mine given here i refer to the same paper as above: Card and Krueger (1992) I have understood the rationale for use of "cohort and state fixed ...
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At what level should I cluster my standard errors and why?

I have a yearly panel data in which each observation is a pair of monitoring stations (stations measuring water quality in rivers) one located upstream and the other downstream, each station in the ...
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Consistent estimation of fixed effects

Estimating firm fixed effects is very popular in labor economics. I wonder why this is legit? The estimates shouldn't be consistent, the more firms we have the more parameters we have to estimate.
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Clustering of standard errors in Fixed Effects models

Why is there still a block structure in the covariance-variance matrix, and consequently a need for clustering of standard errors in fixed-effects models? Shouldn't demeaning solve the serial ...
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How to get the bias-adjusted variance estimates for high-dimensional fixed effects in a linear model?

I want to do a linear regression: $y_{i}=\psi_{j(i)}+X_{i}^{\prime} \xi+\varepsilon_{i}$, where $\psi_{j(i)}$ is a high dimensional fixed effect on group $j$, $X_i$ are the covariables of each ...
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What are the difference between industry fixed effects and industry*year fixed effects?

In some papers, in column 4 Table 1, the author used firms fixed effects and industry*year fixed effect at the same time. I have two questions here: What does industry * year fixed effect mean? What ...
Phil Nguyen's user avatar
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3 votes
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3k views

Fixed effects vs first difference

Or more generally, what are the reasons for the absolute dominance of the fixed effects estimators to control for unobserved heterogeneity in large N, short T panel settings? I get that random effects ...
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A revisit to simple DID and Generalised DID

After a couple of questions being asked, I am curious about the inclusion of Post and Treat variable in a simple DID (two groups two-time period). We mainly know there are mainly two types of DID ...
Phil Nguyen's user avatar
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Why we need to add firm and year relating independent variables in two-way fixed effect model?

From what I know, these terms are very basic in econometrics but I still not yet fully got it. To me, year fixed effect is to control time-variant omitted variables and firm fixed effect is to control ...
Phil Nguyen's user avatar
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779 views

Why we need to control for the interation of year and industry fixed effects?

Normally, we control for firm and year fixed effects, but in some case I saw people control for the firm along with yearxindustry or firm and yearxregion fixed effects. Could you please hint me why ...
Phil Nguyen's user avatar
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4 votes
1 answer
354 views

How to interpret fixed effects?

I want to interpret the output of a fixed effects regression and need help with interpreting the country-fixed effects. The regression is the following: ...
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Identification of firm-worker fixed effect wage equation

Consider the traditional AKM model where $$ Y_{it}=X_{it}\beta+\psi_{j(i,t)}+\epsilon_{it} $$ for $i=1,...,N$ (individual index), $t=1,...,T$ (time index), $j=1,...,J$ (firm index), and $j(i,t)$ is ...
Star's user avatar
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How to calculate semi elasticity in fixed effect model with interaction

Given the model specification $$Y_{it} = \beta_1 X_{it} + \beta_2 D*X_{it} + FE_{i} + e_{it}$$ The above model specification is a Fixed effect model with interaction term ($X_{it}$ interacting with D- ...
EI_Otoakhia's user avatar
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Coefficient omitted due to time fixed effect and multi-collinearity

I am working on a research paper (my first one) where I am dealing with company level unbalanced panel data. There are broadly two types of control variables in the study - a) firm level control ...
jaitri's user avatar
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Interaction term between lagged and non lagged variable Fixed/Random effect model

I am analyzing a panel dataset. I am wondering if I could use an interaction of a lagged variable ( one time step behind) and a non lagged variable ( both continuos indipendent variables) and still ...
Hustler885's user avatar
1 vote
1 answer
2k views

R's felm() fixed effects vs. factor() within lm()

I am wondering why using felm's fixed effect option versus using the factor() function is different? I was under the impression they were one in the same? I am running a panel regression where i is ...
DPek's user avatar
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Fixed Effects Model Interpretation

$$\ln(\text{pay})_{itj}= \alpha_{ij} + \beta\ln(\text{performance})_{jt} + \gamma X_{ijt} + T_t + ε_{ijt}$$ This fixed effects model was used to investigate the link between pay-performance throughout ...
MadHatter912's user avatar
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1 answer
2k views

Age effect when controling for individual fixed effects and time fixed effects

I have a individual-by-year panel. Although age is varying within an individual, its variation is fully absorbed when I include individual fixed effects and time fixed effects. This is because each ...
RandomBear's user avatar
3 votes
1 answer
146 views

How to choose between fixed and random effects using economic intuition?

In class, our professor said that when it comes to deciding between estimating panel regression with fixed and random effects we should not just blindly follow the Hausman test, but also think about ...
csilvia's user avatar
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Log log regression with fixed effects and cross elasticity of demand

I have a time series of units sold, and price. I'd like to calculate elasticity of demand wrt to price and a few other variables, some of them are fixed effects. ...
kms's user avatar
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Impactful fixed-effect identification with open data

For a replication project, I am looking for impactful (and ideally somewhat recent) papers that use fixed-effects as their main identification strategy and make their data publicly available. By ...
Martin Van der Linden's user avatar
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How can I add fixed-effect constant variable in Stata?

I want to test a model like this: alpha denotes full set of country fixed effects and delta denotes full set of year fixed effects in the article in which this model is used. My model is similar to ...
Ozlem Akekmekci's user avatar
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1 answer
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Linear Probability Model Instead of Logit in Fixed Effects Regression

In our panel data analysis we estimated a fixed effects linear probability model (LPM) instead of a fixed effects logit regression because our sample size was quite small (600 individuals) and the ...
John's user avatar
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How to determine correct fixed effects in linear regression model using unbalanced paneldata

I am currently working on a research project regarding the introduction of mandatory earnings guidance regulation in multiple countries within a time span of 10 years (staggered adoption). As I can ...
Florian Schramm's user avatar
1 vote
1 answer
116 views

Fixed-Effects on individual level with explanatory variable on state level

I am planing a panel data analysis evaluating a continuous policy intervention. I do have individual level data. I would like to account for individual fixed-effects. However, the explanatory variable ...
R-User's user avatar
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Fixed Effects Estimation and Inconsistency

Consider estimation of the following population regression function: $G{Y_{it}} = {\beta _0} + {\beta _1}IN{F_{it}} + {\beta _2}DE{M_i} + {\beta _3}POI{L_t} + {\varepsilon _{it}}$ Where: $GY_{it}$ = ...
Jaffar 's user avatar
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Publishing fixed and random effects in one model

I am a health economist working with panel data for a paper I am working on, I use Hausman tests to determine if I should use fixed or random effects estimators in my analysis. For some outcomes ...
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