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RE: st: Stata 11 Random Effects--Std. Errors


From   "David M. Drukker" <ddrukker@stata.com>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: Stata 11 Random Effects--Std. Errors
Date   Wed, 19 Aug 2009 12:03:41 -0500 (CDT)

Continuing the thread about why -xtreg .., re vce(robust)- changed its
meaning between Stata 10 and Stata 11, Mark E Schaffer
<M.E.Schaffer@hw.ac.uk> asked for a citation.

Wooldridge (2002, section 10.4.2) recommends the new approach of having
-vce(robust)- mean -vce(cluster panelvar)-.

When we first offered the -vce(robust)- and -vce(cluster clustvar)- on
-xtreg, re-, we wanted to offer users the flexibility to use either
estimator.  We had Monte Carlo simulations showing that there are data
generating processes for which -vce(robust)- performs quite well, so we
allowed users to choose.

Since we first offered these options, the literature has focused on always using -vce(cluster panelvar)- to obtain a "robust" estimator for -xtreg, re-. We made the change because the new method is what users now expect and it offers additional generality.

  David
  --ddrukker@stata.com

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