Mastering Fixed-Effects Regression in R

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In statistics, a fixed-effects model is a statistical model in which the model parameters are fixed or non-random quantities. This is in contrast to random-effects models and mixed models in which all or some of the model parameters are random variables. In many applications including econometrics and biostatistics, a fixed-effects model refers to a regression model in which the group means are fixed (non-random) as opposed to a random-effects model in which the group means are a random sample from a population.[6] Generally, data can be grouped according to several observed factors. The group means could be modeled as fixed or random effects for each grouping. In a fixed-effects model each group mean is a group-specific fixed quantity.

In panel data where longitudinal observations exist for the same subject, fixed effects represent the subject-specific means. In panel data analysis the term fixed effects estimator (also known as the within estimator) is used to refer to an estimator for the coefficients in the regression model including those fixed effects (one time-invariant intercept for each subject).

[ajl_]

Great video, needed help with a project that involved lots of panel data analysis. Cheers

[stephenogbodo]

Thank you. This was very clear, straightforward and helpful.

[IrisSmiderle]

Hello! What about the "effect" option? I found that in my code it is necessary to specify [effect = "twoways"] when accounting both for state and year fixed effects, otherwise it just accounts for the first specified (in this example "state").

[sankalp]

Hello Sir, could you please explain why there is no intercept in the r output of the fixed effect model? Also, what is the interpretation of a negative Adj. R square?

[antoniorodriguezandres]

But this model is mis-specified as there are many other control variables needed. Based on Becker's theory you need a key variable as the clear up rate. Please check John Lott. Indeed, I am not sure if it would be better to consider violent crimes as count data instead of using rates

[EduardoGallizzi]

Great video, Diogo! Could you give me some idea about a topic for my bachelor thesis in Econ, having background in finance + R? Wanna write something related to commodities but I'm a bit lost. I to intend mention it in my application for a Msc. in finance later on... Abraços!

[ramonkonig]

Thanks for the video. I am pretty new to the topic and was wondering if it would make sense to do a fixed effects regression in either of the following cases:

1. When the independent variable is different for every observation
2. When the independent variable can only be in one of two groups (and therefore is a dummy)

Would appreciate your reply a lot, thank you!

[jibbersilvan]

switzerland is not part of the EU therefore also not the richest country of the EU