-- RalfMartin - 06 Jun 2007

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Title Computing double fixed effects groups
Author Ralf Martin
Year 2004
Abstract This is a STATA programme that computes groups of connected units in a double fixed effects context. Double fixed effects models have been used in the employer-employee or in the firm-plant context (where a firm can own multiple plants and plants change ownership over time).
A connected group is the set of all plants that had a common owner at any point in time; i.e. two plants that are owned by the same firm at two different points in time would still be in the same group. Knowing which plants are in the same group might help to make double fixed effects regression feasible. Separate identification of firm and plant effects is only possible within connected groups. This implies that fixed effects are only meaningful to infer differences between units in a group. For the same reason it is sufficient to compute fixed effects for each connected group separately. This can make double fixed effects regression feasible if the maximum number of firms (let's stay with the plant firm example) in a group is not too high. One can implement it then as a fixed effects regression (fixed effects at the plant level) with a set of firm dummies as regressors. (I will put a paper on this page soon which explains these issues a bit better)
Topic revision: r4 - 14 Mar 2011, JonathanHaskel

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