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From |
Christopher Baum <[email protected]> |

To |
"[email protected]" <[email protected]> |

Subject |
Re: Re: st: Direction of the effect of the cluster command on the standard error depends on the inclusion of a control variable |

Date |
Thu, 6 Jan 2011 08:20:45 -0500 |

<> On Jan 6, 2011, at 2:33 AM, Stas wrote: > > There are terrible small sample biases exhibited by -robust- and > - -cluster()- standard errors with small # of observations and clusters, > respectively. As was noted by Justina, four clusters is SO far away > from asymptotics that I wouldn't even consider the clustered standard > errors in your situation. Just to add one thing to Stas', Justina's and Austin's replies... It is useful to think of the cluster-robust VCE estimator generating 'super-observations' , one per cluster. Thus with 4 clusters, you essentially are estimating a model with N=4 to compute the VCE. Some official Stata commands will let you do that, even when the number of coefficients > N. Baum-Schaffer-Stillman -ivreg2- (on SSC) will flag that as a problem, as it does not make much sense to do so. But one of the reasons that a small number of clusters may yield horrible results is that it represents estimation with a very small sample. Kit Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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