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demean

Centers a set of variables around a set of factors

Description

User-level access to internal demeaning algorithm of fixest.

Usage

demean(
  X,
  f,
  slope.vars,
  slope.flag,
  data,
  weights,
  nthreads = getFixest_nthreads(),
  notes = getFixest_notes(),
  iter = 2000,
  tol = 1e-06,
  na.rm = TRUE,
  as.matrix = is.atomic(X),
  im_confident = FALSE
)

Arguments

X

A matrix, vector, data.frame or a list OR a formula. If equal to a formula, then the argument data is required, and it must be of the type: x1 + x2 ~ f1 + fe2 with on the LHS the variables to be centered, and on the RHS the factors used for centering. Note that you can use variables with varying slopes with the syntax fe[v1, v2] (see details in feols). If not a formula, it must represent the data to be centered. Of course the dimension of that data must be the same as the factors used for centering (argument f).
f

A matrix, vector, data.frame or list. The factors used to center the variables in argument X. Matrices will be coerced using as.data.frame.
slope.vars

A vector, matrix or list representing the variables with varying slopes. Matrices will be coerced using as.data.frame. Note that if this argument is used it MUST be in conjunction with the argument slope.flag that maps the factors to which the varying slopes are attached. See examples.
slope.flag

An integer vector of the same length as the number of variables in f (the factors used for centering). It indicates for each factor the number of variables with varying slopes to which it is associated. Positive values mean that the raw factor should also be included in the centering, negative values that it should be excluded. Sorry it's complicated... but see the examples it may get clearer.
data

A data.frame containing all variables in the argument X. Only used if X is a formula, in which case data is mandatory.
weights

Vector, can be missing or NULL. If present, it must contain the same number of observations as in X.
nthreads

Number of threads to be used. By default it is equal to getFixest_nthreads().
notes

Logical, whether to display a message when NA values are removed. By default it is equal to getFixest_notes().
iter

Number of iterations, default is 2000.
tol

Stopping criterion of the algorithm. Default is 1e-6. The algorithm stops when the maximum absolute increase in the coefficients values is lower than tol.
na.rm

Logical, default is TRUE. If TRUE and the input data contains any NA value, then any observation with NA will be discarded leading to an output with less observations than the input. If FALSE, if NAs are present the output will also be filled with NAs for each NA observation in input.
as.matrix

Logical, if TRUE a matrix is returned, if FALSE it will be a data.frame. The default depends on the input, if atomic then a matrix will be returned.
im_confident

Logical, default is FALSE. FOR EXPERT USERS ONLY! This argument allows to skip some of the preprocessing of the arguments given in input. If TRUE, then X MUST be a numeric vector/matrix/list (not a formula!), f MUST be a list, slope.vars MUST be a list, slope.vars MUST be consistent with slope.flag, and weights, if given, MUST be numeric (not integer!). Further there MUST be not any NA value, and the number of observations of each element MUST be consistent. Non compliance to these rules may simply lead your R session to break.

Value

It returns a data.frame of the same number of columns as the number of variables to be centered.

If na.rm = TRUE, then the number of rows is equal to the number of rows in input minus the number of NA values (contained in X, f, slope.vars or weights). The default is to have an output of the same number of observations as the input (filled with NAs where appropriate).

A matrix can be returned if as.matrix = TRUE.

Varying slopes

You can add variables with varying slopes in the fixed-effect part of the formula. The syntax is as follows: fixef_var[var1, var2]. Here the variables var1 and var2 will be with varying slopes (one slope per value in fixef_var) and the fixed-effect fixef_var will also be added.

To add only the variables with varying slopes and not the fixed-effect, use double square brackets: fixef_var[[var1, var2]].

In other words:

  • fixef_var[var1, var2] is equivalent to fixef_var + fixef_var[[var1]] + fixef_var[[var2]]

  • fixef_var[[var1, var2]] is equivalent to fixef_var[[var1]] + fixef_var[[var2]]

In general, for convergence reasons, it is recommended to always add the fixed-effect and avoid using only the variable with varying slope (i.e. use single square brackets).

Examples

# Illustration of the FWL theorem
data(trade)

base = trade
base$ln_dist = log(base$dist_km)
base$ln_euros = log(base$Euros)

# We center the two variables ln_dist and ln_euros
#  on the factors Origin and Destination
X_demean = demean(X = base[, c("ln_dist", "ln_euros")],
                  f = base[, c("Origin", "Destination")])
base[, c("ln_dist_dm", "ln_euros_dm")] = X_demean

est = feols(ln_euros_dm ~ ln_dist_dm, base)
est_fe = feols(ln_euros ~ ln_dist | Origin + Destination, base)

# The results are the same as if we used the two factors
# as fixed-effects
etable(est, est_fe, se = "st")

#
# Variables with varying slopes
#

# You can center on factors but also on variables with varying slopes

# Let's have an illustration
base = iris
names(base) = c("y", "x1", "x2", "x3", "species")

#
# We center y and x1 on species and x2 * species

# using a formula
base_dm = demean(y + x1 ~ species[x2], data = base)

# using vectors
base_dm_bis = demean(X = base[, c("y", "x1")], f = base$species,
                     slope.vars = base$x2, slope.flag = 1)

# Let's look at the equivalences
res_vs_1 = feols(y ~ x1 + species + x2:species, base)
res_vs_2 = feols(y ~ x1, base_dm)
res_vs_3 = feols(y ~ x1, base_dm_bis)

# only the small sample adj. differ in the SEs
etable(res_vs_1, res_vs_2, res_vs_3, keep = "x1")

#
# center on x2 * species and on another FE

base$fe = rep(1:5, 10)

# using a formula => double square brackets!
base_dm = demean(y + x1 ~ fe + species[[x2]], data = base)

# using vectors => note slope.flag!
base_dm_bis = demean(X = base[, c("y", "x1")], f = base[, c("fe", "species")],
                     slope.vars = base$x2, slope.flag = c(0, -1))

# Explanations slope.flag = c(0, -1):
# - the first 0: the first factor (fe) is associated to no variable
# - the "-1":
#    * |-1| = 1: the second factor (species) is associated to ONE variable
#    *   -1 < 0: the second factor should not be included as such

# Let's look at the equivalences
res_vs_1 = feols(y ~ x1 + i(fe) + x2:species, base)
res_vs_2 = feols(y ~ x1, base_dm)
res_vs_3 = feols(y ~ x1, base_dm_bis)

# only the small sample adj. differ in the SEs
etable(res_vs_1, res_vs_2, res_vs_3, keep = "x1")
fixest

Fast Fixed-Effects Estimations

v0.10.0
GPL-3
Authors
Laurent Berge [aut, cre], Sebastian Krantz [ctb], Grant McDermott [ctb] (<https://orcid.org/0000-0001-7883-8573>)
Initial release

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