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Asymptotic Theory And Wild Bootstrap Inference With Clustered Errors

Antoine Djogbenou (), James MacKinnon () and Morten Nielsen ()

No 1399, Working Paper from Economics Department, Queen's University

Abstract: We study asymptotic inference based on cluster-robust variance estimators for regression models with clustered errors, focusing on the wild cluster bootstrap and the ordinary wild bootstrap. We stateconditions under which both asymptotic and bootstrap tests and confidence intervals will be asymptotically valid. These conditions put limits on the rates at which the cluster sizes can increase as the number of clusters tends to infinity. To include power in the analysis, we allow the data to be generated under sequences of local alternatives. Under a somewhat stronger set of conditions, we also derive formal Edgeworth expansions for the asymptotic and bootstrap test statistics. Simulation experiments illustrate the theoretical results, and the Edgeworth expansions explain the overrejection of the asymptotic test and shed light on the choice of auxiliary distribution for the wild bootstrap.

Keywords: wild cluster bootstrap; clustered data; cluster-robust variance estimator; CRVE; Edgeworth expansion; inference; wild bootstrap (search for similar items in EconPapers)
JEL-codes: C15 C21 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2018-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1399.pdf First version 2018 (application/pdf)

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Working Paper: Asymptotic Theory and Wild Bootstrap Inference with Clustered Errors (2019) Downloads
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