The Stata command felsdvreg to fit a linear model with two high–dimensional fixed effects
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.
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Thomas Cornelissen
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felsdvreg, linked employer–employee data, fixed effects, three-way error-components model
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