Continuing the thread about why -xtreg .., re vce(robust)- changed its
meaning between Stata 10 and Stata 11, Mark E Schaffer
<[email protected]> 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
[email protected]
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