You may be tempted to calculate the degrees of freedom with FE estimation using the traditional (OLS) calculation (total number of observations minus the number of estimated parameters), but be careful! First, notice that you don’t have an intercept to work with. And remember that you lose one degree of freedom for each cross-sectional observation from demeaning. Consequently, the correct formula for calculating the degrees of freedom is nT – n – p, where n is the number of cross-sectional units, T is the number of time periods, and p is the number of independent
variables.