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Re: st: ivreg2 missing SE's when using two cluster variables


From   Austin Nichols <austinnichols@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: ivreg2 missing SE's when using two cluster variables
Date   Mon, 17 Sep 2012 15:09:25 -0400

The 2-way cluster-robust SE is constructed from V1+V2-V12
and that matrix is not guaranteed to be PSD.  I would
use the nearest PSD matrix to the defective matrix instead.
Or use the max over SE for clustering in either dimension
and both dimensions, where a max over two numbers and
missing is the max over two numbers.

On Mon, Sep 17, 2012 at 3:02 PM,  <Max.Livingston@ny.frb.org> wrote:
> Hello,
>
> I'm performing some analyses using -ivreg2- to perform OLS with two
> cluster variables. I also have a relatively small sample (around 200 obs)
> so I'm using the small option. I found that in some of my models, there is
>
> no std error. While this is not incredibly surprising given the small n
> and multiple clusters, I'm a little confused as to why I experience this
> problem in some models and not others, and what potential solutions may
> exist. The help file explains that if the small option is used with
> clustering, ivreg2 makes the following adjustment: qc =
> (N-1)/(N-K)*M/(M-1), where M is the minimum # of clusters from the two
> cluster variables. Yet, when I run the same regression with either one of
> the clusters, ivreg2 is able to calculate the std. error. Further details:
>
> N=251, cluster1 has 119 clusters, cluster2 has 60. This is not a case of
> singleton dummies, as there is only one independent variable.
>
> Any advice you may have would be greatly appreciated.
>
> Thanks,
> Max
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