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From |
"Lisa M. Powell" <powelll@uic.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Clustered standard errors in -xtreg- with dfadj |

Date |
Sun, 08 Mar 2009 09:34:29 -0500 |

Dear List members, I would like to follow up on some of your email exchanges (see email exchange at the bottom of this email) regarding the inclusion of the dfadj command when clustering standard errors in an FE panel model. I have an unbalanced sample of individuals over 4 waves of data. I include county level variables in the analyses which are my key variables of interest and I would like to cluster on the county id. Given that individuals can move over time, they are not fully nested within the clusters (the counties). In STATA 10, if I try to run: xtreg outcome $econ5, i(caseid) vce(cluster fip) fe; then I get the message of: panels are not nested within clusters r(498); which is indeed the case. I gather that in earlier version of STATA such as 8.0 where one did not have to specify nonest using the cluster command even when the panels were not nested that STATA as the default implemented dfadj ? Is that correct? Therefore, I have added the option "nonest". (xtreg outcome $econ5, i(caseid) vce(cluster fip) nonest fe)

(xtreg outcome $econ5, i(caseid) vce(cluster fip) nonest dfadj fe) In another post, a few years ago, Mark Schaffer responded as follows which was very helpful:

My question now: Is there a "partial" adjustment that can be done?

Any further advice that you could offer would be much appreciated. many thanks, Lisa * *From* "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk <mailto:M.E.Schaffer@hw.ac.uk>> *To* <statalist@hsphsun2.harvard.edu <mailto:statalist@hsphsun2.harvard.edu>> *Subject* RE: st: Clustered standard errors in -xtreg- *Date* Thu, 28 Dec 2006 13:55:02 -0000 ------------------------------------------------------------------------ Thomas,

-----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Thomas Corneli?en Sent: 28 December 2006 12:29 To: statalist@hsphsun2.harvard.edu Subject: Re: st: Clustered standard errors in -xtreg- > Thomas Cornelissen wrote: > >> I am comparing two different ways of estimating a linear > >> fixed-effects > >> model: > >> > >> Method 1: Use -regress- and include dummy variables for the panels. > >> Method 2: Use -xtreg, fe-. > >> > >> These two deliver exactly the same estimates of coefficients and > >> their standard errors (if I do not cluster the standard errors). > >> > >> However, if I use the option -cluster- in order to get clustered > >> standard errors (clustered on the panel ID), I get different > >> results with the two ways of estimating the model. > >> > >> Why is this ?

<snip>

Is there a rationale for not counting the absorbed regressors when standard errors are clustered ? Haven't degrees of freedom been used for absorbing the variables and therefore the absorbed regressors should always be counted as well?

Cheers, Mark Prof. Mark Schaffer Director, CERT Department of Economics School of Management & Languages Heriot-Watt University, Edinburgh EH14 4AS tel +44-131-451-3494 / fax +44-131-451-3296 email: m.e.schaffer@hw.ac.uk web: http://www.sml.hw.ac.uk/ecomes -- Lisa M. Powell, PhD Research Associate Professor Senior Research Scientist Institute for Health Research and Policy University of Illinois at Chicago tel: 312-413-8468

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**Follow-Ups**:**st: RE: Clustered standard errors in -xtreg- with dfadj***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

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