R 中 function 的时间固定效应

Question

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I'm using the felm function in R for time-fixed effects but I'm having trouble specifying my model.

I tried the following two but they result into completely different outputs. Could you explain what does the 0 stand for? Which of the following models would be correct for my analysis? My sample consists of 400 observations (40 countries over 10 years).

model_1 <- felm(y ~ x1 + x2 + x3 | year | 0 | year, data = df)

model_2 <- felm(y ~ x1 + x2 + x3 | year, data = df)

I would really appreciate some advice on this, thank you!

Answer 1

In lfe::felm we may specify fixed effects, instruments, and cluster, eg

y ~ x1 + x2 | f1 + f2 | (Q|W ~ x3+x4) | clu1 + clu2 

The 0 indicates that you do not want to specify anything.

So in

model_1 <- felm(y ~ x1 + x2 + x3 | year | 0 | year, data = df)

you specified year fixed effects and standard errors clustered by year,

whereas in

model_2 <- felm(y ~ x1 + x2 + x3 | year, data = df)

you specified just the year fixed effects.

Note: Read Details section in ?lfe::felm .