Standard errors for panel data models with unknown clusters

Jushan Bai, Sung Hoon Choi and Yuan Liao

Journal of Econometrics, 2024, vol. 240, issue 2

Abstract: This paper develops a new standard-error estimator for linear panel data models. The proposed estimator is robust to heteroskedasticity, serial correlation, and cross-sectional correlation of unknown forms. The serial correlation is controlled by the Newey–West method. To control for cross-sectional correlations, we propose to use the thresholding method, without assuming the clusters to be known. We establish the consistency of the proposed estimator. Monte Carlo simulations show the method works well. An empirical application is considered.

Keywords: Panel data; Clustered standard errors; Thresholding; Cross-sectional correlation; Serial correlation; Heteroskedasticity (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Standard Errors for Panel Data Models with Unknown Clusters (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:240:y:2024:i:2:s0304407620303341

DOI: 10.1016/j.jeconom.2020.08.006

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