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st: areg vce(cluster id) for panel intraclass correlation on individual level?


From   Björn Bünger <13bjbu@wiwi.uni-muenster.de>
To   statalist@hsphsun2.harvard.edu
Subject   st: areg vce(cluster id) for panel intraclass correlation on individual level?
Date   Thu, 04 Feb 2010 09:37:51 +0100

Dear Statalister,

I'm working with data from a household panel (GSOEP). When doing a fixed effects regression ( "areg, absorb(id)") the question is whether to use the "clustered data" option (vce(cluster id)) if I want to analyze data "only" on the level of individuals.

Lahiri/Li (2009), 3430 say: "In health studies, observations are often collected on the same subject over time leading to correlated observations.", while textbooks like Wooldridge
(2002) give the example of, e. g. the grouping of individuals
in households. Therefore I'm quite certain that the "cluster" option would be necessary if I included the problem that normally more than one individual is a member of the same household. 

But what about the problem that observations of one individual at different points of time form one cluster, so intraclass correlation is to be expected? Is this already accounted for by the use of xtreg, fe or areg or is the additional use of the cluster-option sensible? 

Lahiri, P./Li, Yan (2009), A new alternative to the standard F test for clustered data, Journal of Statistical Planning and Inference 139, 3430 - 3441.

Wooldridge, Jeffrey M. (2002), Econometric Analysis of Cross Section And Panel Data, MIT Press, Cambridge, MA/London.

Thanks for your consideration!

Best wishes,

Björn Bünger
PhD-Student
Institute of Public Economics 
Münster 
Germany

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