Evaluating one-way and two-way cluster–robust covariance matrix estimates

Christopher Baum, Austin Nichols and Mark Schaffer ()
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Austin Nichols: Urban Institute

German Stata Users' Group Meetings 2011 from Stata Users Group

Abstract: Although cluster–robust standard errors are now recognized as essential in a panel-data context, official Stata only supports clusters that are nested within panels. This rules out the possibility of defining clusters in the time dimension, and modeling contemporaneous dependence of panel units’ error processes. We build upon recent analytical developments that define two-way (and conceptually, n-way) clustering, and the 2010 implementation of two-way clustering in the widely used ivreg2 and xtivreg2 packages. We present examples of the utility of one-way and two-way clustering using Monte Carlo techniques, a comparison with alternative approaches to modeling error dependence, and consider tests for clustering of errors.

Date: 2011-07-23
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Citations: View citations in EconPapers (5)

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http://fmwww.bc.edu/repec/dsug2011/desug11_schaffer.pdf (application/pdf)

Related works:
Working Paper: Evaluating one-way and two-way cluster-robust covariance matrix estimates (2010)
Working Paper: Evaluating one-way and two-way cluster-robust covariance matrix estimates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:dsug11:02

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