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Practical correlation bias correction in two-way fixed effects linear regression

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Forfattere:

Gaure, Simen

År:

2014

Referanse:

Memorandum
Nummer i serie: 21

Summary

When doing two-way fixed effects OLS estimations, both the variances and covariance of the fixed effects are biased. A formula for a bias correction is known, but in large datasets it involves inverses of impractically large matrices. We detail how to compute the bias correction in this case.

Nøkkelord:

Limited mobility bias, Two way fixed effects, Linear regression

JEL:

: C13, C33, C55, C87

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