Within Variation

Within variation is the part of a variable's variance that comes from changes within a unit over time — how unit $i$ differs from its own average across time periods. In a panel decomposition, within + between = total. The Fixed Effects / Within Estimator uses only within variation; it is what makes panel methods credible for causal inference under unobserved time-invariant confounders.

When to use

Whenever a panel-data design is justified, the credibility comes from within variation: a state's seatbelt law switches from 0 to 1 (PS_4); a judge gets older within a court (Heyes-Saberian); a firm's wages change over time. If a regressor has no within variation (e.g. a state's region of the country), FE cannot estimate its coefficient at all — the demeaning kills it.