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st: Large differences between standard errors with and without clustering


From   "M.C.D. van Damme" <m.vandamme@uvt.nl>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Large differences between standard errors with and without clustering
Date   Tue, 30 Oct 2007 16:56:53 +0100

Dear stata-users, 

I am estimating an OLS regression with variables on the individual and
country level, correcting for intragroup correlation (,cl(country)).
I have 13 countries. 
After correction, not only the standard error of the country level variable
is corrected, but also the standard errors of some of the individual level
variables are much higher. Normally, I do not find such big differences.

For example:
Without clustering I find
Coef.      Std. Err.      t    P>|t|   
.7433815   .1794611     4.14   0.000
.96435     .3545498     2.72   0.007 
.8408647   .3560319     2.36   0.018 
.0625538   .0325211     1.92   0.054 

With clustering the results are as follows
.7433815   .4125596     1.80   0.097
.96435     .6568512     1.47   0.168
.8408647   .5246695     1.60   0.135
.0625538   .0846104     0.74   0.474


What can be the reason for these large adjustments in standard errors on the
individual level?
In other words, what is the cluster option exactly doing?

Thanks in advance.
Maike


---------------------------------------
Maike van Damme
Department of Sociology 
Tilburg University
P.O. Box 90153
5000 LE Tilburg
The Netherlands
tel: +31 (0)13-4662112
fax: +31 (0)13-4663002
email: m.vandamme@uvt.nl
--------------------------------------- 


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