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RE: RE : Heteroskedasticity and fixed effects (was: st: RE: Re: Weak instruments)


From   "Verkuilen, Jay" <JVerkuilen@gc.cuny.edu>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: RE : Heteroskedasticity and fixed effects (was: st: RE: Re: Weak instruments)
Date   Thu, 17 Jul 2008 16:33:08 -0400

Schaffer, Mark E wrote:

>The general motivation behind the advice seems reasonable - why assume
something that you don't have to assume, if making the >assumption is
potentially costly and relaxing the assumption is nearly costless?  Of
course, this doesn't excuse us from the >responsibility of giving our
model "a good long look", but we should do that anyway.

This assumes that the solution -is- costless. It may well not be. As the
Carroll et al paper I sent a link to in an earlier email notes
(http://www.stat.tamu.edu/ftp/pub/rjcarroll/sandwich.pdf), most of the
discussion of robust VCE is in asymptotic terms. With small to medium
samples and different models your mileage may most definitely vary. 

I generally think robust VCE is a good thing to have, mind you, but
something that should not be blindly applied to cover up a crappy,
misspecified model. 



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