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st: Changes to two way clustering ivreg2 update

From   Samuel Bazzi <[email protected]>
To   [email protected]
Subject   st: Changes to two way clustering ivreg2 update
Date   Sun, 30 Jan 2011 17:02:02 -0800

Were there changes implemented in the updated -(xt)ivreg2- calculation
of standard errors in the case of two-way clustering? After updating
to the most recent version of -ivreg2- one week ago, I am unable to
replicate earlier results on standard errors from cross-country panel
regressions with clustering on country and year. Point estimates and
one-way clustering results remain unchanged. I've scoured the detailed
update/version log but found nothing immediately relevant to this
issue. The old version of -ivreg2- was 3.0.01 8Feb2010. The new
version is 3.0.05 17June2010. -xtivreg2- was in both cases the 1.0.11
17June2010 version. Prior estimates were therefore based on a pairing
of 1.0.11 -xtivreg2- and 3.0.01 -ivreg2-, while new estimates were
based on 3.0.05 -ivreg2-. Also, all estimates were performed on Stata
version 10.1.

On a possibly related note, I now find that two-way clustering (with
the updated program) produces standard errors that are in some cases
smaller than and in all cases much closer to the one-way clustering
(on country) results. I understand how this can arise mathematically
but fail to grasp why the new two-way clustered std errors are so much
smaller than ones implemented with the older version of the program.

Have there been any changes in internal programs across these versions
of -ivreg2-? The fact that neither the point estimates nor the one-way
clustered std errors change leads me to believe that something differs
in the underlying -(xt)ivreg2- programs used to generate the two-way
clustered var-covar matrix.

Thanks for your consideration.

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