PANEL Procedure
One-Way Fixed-Effects Model, First Differencing (FDONE and FDONETIME Options)
You perform one-way fixed-effects estimation via first differencing by specifying the FDONE option in the MODEL statement. The method of first differencing offers an alternative to the within estimator 
. Consider the following one-way fixed-effects model:
For this model, the fixed effects are removed by subtracting first-order lags from both sides of the equation:
Define 
and 
, for 
and 
. You obtain the first-differenced estimator, 
, and its variance by performing OLS regression of 
on 
.
The estimation and parameterization of 
are identical to that described in the section One-Way Fixed-Effects Model (FIXONE and FIXONETIME Options), with replaced by .
The FDONETIME option works similarly, switching the roles of cross sections and time periods in the methodology described previously.