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The Stata command felsdvreg to fit a linear model with two high–dimensional fixed effects

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  • Cornelissen, Thomas

Abstract

This article proposes a memory-saving decomposition of the design matrix to facilitate the estimation of a linear model with two high-dimensional fixed effects. A common way to fit such a model is to take into account one of the effects by including dummy variables and to sweep out the other effect by the within transformation (fixed-effects transformation). If the number of panel units is high, creating and storing the dummy variables can involve prohibitively large computer-memory requirements. The memory-saving procedure to set up the moment matrices for estimation presented in this article can reduce the memory requirements considerably. The companion Stata ado-file felsdvreg implements the estimation method, takes care of identification issues, and provides useful summary statistics.

Suggested Citation

  • Cornelissen, Thomas, 2008. "The Stata command felsdvreg to fit a linear model with two high–dimensional fixed effects," Stata Journal, StataCorp LP, vol. 8(2), pages 1-20.
  • Handle: RePEc:ags:stataj:122585
    DOI: 10.22004/ag.econ.122585
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    References listed on IDEAS

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    1. Andrews, Martyn & Schank, Thorsten & Upward, Richard, 2006. "Practical fixed-effects estimation methods for the three-way error-components model," Stata Journal, StataCorp LP, vol. 6(4), pages 1-21.
    2. M. J. Andrews & L. Gill & T. Schank & R. Upward, 2008. "High wage workers and low wage firms: negative assortative matching or limited mobility bias?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 673-697, June.
    3. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    4. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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    Keywords

    Research Methods/ Statistical Methods;

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