The most common method of dealing with fixed effects of cross-sectional units is known as the fixed effects (FE) estimator. FE estimation is applied by time demeaning the data. In other words, you calculate the average value of a variable over time for each cross-sectional unit and subtract this mean from all observed values of a given cross-sectional unit, repeating the procedure for all the cross-sectional units. Demeaning deals with unobservable factors because it takes
out any component that is constant over time. By assumption, that would be the entire amount of the unobservable variable.