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Re: st: RE: clustering necessary for xtreg, fe i(id)?


From   "Stas Kolenikov" <skolenik@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: RE: clustering necessary for xtreg, fe i(id)?
Date   Wed, 3 May 2006 12:08:00 -0500

> But this is incorrect, no?  I should include the cluster(id) syntax if I
> want to correct for this problem, right?
Using the cluster option allows for the possibility that the specific
form of correlation takes a form other than the fixed/random effects
form.  If so, then the coefficient estimates will be consistent, but the
usual standard errors will be wrong.  The cluster option will give you
standard errors that are consistent if the intertemporal correlation
isn't of the fixed/random effects form.
One other violation of the second moments assumption this should guard
against is panel heteroskedasticity when the individual errors have
different variances for different ID.

--
Stas Kolenikov
http://stas.kolenikov.name

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