Thanks for the comment. In almost all textbooks you see the standard representation like Equation (3). It can be thought of as i = 0, 1. When there are multiple individuals like i = 1,…N, the dummy variable D_i are used and 𝝆_i can be considered as the shorthand for a set of (N-1) dummy variables. Equation (4) is what you see in the regression output.

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How to estimate Equation (3)? The fixed effects 𝝆_i can be thought of as the shorthand for a set of (N-1) dummy variables D_i with respective coefficient 𝜽_i, as shown in Equation (4).

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