Correlation bias correction in two-way fixed-effects linear regression
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When doing two-way fixed-effects ordinary least squares 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.
limited mobility bias; linear regression; two-way fixed effects
Project:Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.: 202513
Frisch prosjekt: 1172 - Social Insurance and Labor Market Inclusion in Norway