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st: xtscc and small samples (equal size T and N)

From   christina sakali <[email protected]>
To   statalist <[email protected]>
Subject   st: xtscc and small samples (equal size T and N)
Date   Mon, 19 Sep 2011 14:43:58 +0300

Hello all,

I am estimating 3 different specifications of a panel fixed effects
model with T=N=11. According to Pesaran's test I have found the
presence of contemporaneous correlation in all 3 specifications.

I then tried to estimate all 3 specs with both -xtscc ..., fe- and
-xtreg ..., fe cluster(panelvar) -

When comparing the S.E. produced by the two estimators, I was
surprised to notice the following:

Although in the first spec, xtscc S.E. were ALL larger than cluster
S.E., in the other two specs xtscc S.E. were either larger or smaller
than cluster S.E. However the difference was rather small.

What does this indicate for my data and model (when xtscc produces
both smaller and larger S.E. than cluster in the same specification)
and which of the two estimates (xtscc or cluster) should I trust as
more appropriate for my model?

I am using Stata 9.2.

Any help or suggestions are appreciated.
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