From the discussion of @Thomas Bilach here,
The "group" fixed effects is technically referring to the panel unit. If the panel unit is firms observed over time and the policy impacts some firms and not others, then it is customary to estimate firm fixed effects.
Normally, in many papers, I saw that they mostly control for firm-fixed effects, for example, Dasgupta, 2019, when examining the impact of laws on countries also use the firm-fixed effects.
However, I am curious about why we must use firm-fixed effects in Dasgupta's case? Because the laws have an impact at national levels rather than specific firm levels. I mean, from my understanding, when we examine the impact of law on firms' asset growth, we must do country-fixed effect, the firm-fixed effect is an option, not a must. I am wondering if I fell into any fallacy.
I will rewrite the statement of Thomas Bilach based on my understanding if the panel unit is "country"
The "group" fixed effects is technically referring to the panel unit. If the panel unit is countries observed over time and the policy impacts some countries and not others, then it is customary to estimate countries fixed effects.