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The TSCSREG Procedure |
The specification for the two-way fixed effects model is
Let X_{*} and y_{*} be the independent and dependent variables arranged by time and by cross section within each time period. Let M_{t} be the number of cross sections observed in year t and let . Let D_{t} be the M_{t} × N matrix obtained from the N × N identity matrix from which rows corresponding to cross sections not observed at time t have been omitted. Consider
Let
The estimators for the intercept and the fixed effects are given by the usual OLS expressions.
The estimate of the regression slope coefficients is given by
The estimator of the error variance is
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