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st: Variance estimation with clusters

From   "Gittleman, Maury - BLS" <>
To   <>
Subject   st: Variance estimation with clusters
Date   Thu, 8 Nov 2007 09:05:18 -0500


I'm have a question concerning stata's approach to estimating standard
errors in the presence of clustered survey data.  The survey I'm using
collects information on individual wages, by first selecting
establishments at random, and then collecting information on multiple
workers within each establishment.  So, it is clear that, when I'm
running regressions, I need to cluster on establishment.

My question arises when I use two years of data from the same survey.
For about 4/5 of the individuals, there will be data for two years, and
I would expect that the correlation between the errors for any given
individual will be higher than the correlation between the errors for
two different individuals at the same establishment.  My thinking is
that I still want to define clusters by establishments, as the variance
estimation is said to be robust to any arbitrary intra-cluster

Is this the right way to go or is there an alternative approach that
might be superior?

Thanks very much.


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