Practical correlation bias correction in two-way fixed effects linear regression

Simen Gaure

When doing two-way fixed effects OLS 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.

Year of publication:	2014 ; This version August 2014
Authors:	Gaure, Simen
Publisher:	Oslo : Dep. of Economics, Univ. of Oslo
Subject:	Limited mobility bias \| Two way fixed effects \| Linear regression \| Schätztheorie \| Estimation theory \| Regressionsanalyse \| Regression analysis \| Systematischer Fehler \| Bias \| Korrelation \| Correlation

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