I have a question about different approaches to robust
standard errors using ivreg2 with panel data. My
understanding is that ivreg2 with the bw() option produces
Newey-West standard errors. In the panel context, I believe
that using the cluster option is analagous to applying
Newey-West where we allow for all lags to be important.
Hence, I would expect that using the cluster option is
equivalent to speciying robust and bw(t), where t is the
number of time periods in the data. However, I see that the
results are not the same. Here is an example:
use http://fmwww.bc.edu/ec-p/data/macro/abdata.dta
tsset id year
ivreg2 n w k ys, bw(9) robust small /* newey-west? */
ivreg2 n w k ys, cluster(id)
So either my understanding of newey-west and cluster is wrong
or my attempt to implement them is wrong (or both!). Does
anyone have insights into these issues? Thanks.
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