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From |
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: IVREG2 and Multi-way Clustering |

Date |
Sun, 29 Jan 2012 21:02:54 -0000 |

Jessie, > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jessie C > Sent: 29 January 2012 16:54 > To: statalist@hsphsun2.harvard.edu > Subject: st: IVREG2 and Multi-way Clustering > > I have 2 questions about two-way clustering using ivreg2. > > 1. What would be the 1-way cluster equivalent of the > following 2-way clustering? > > ivreg2 y x, cluster(z_1, z_2) None of the three. Two-way clustering is different from one-way clustering. The difference between (c) and 2-way clustering on z_1 and z_2 can be seen from a very simple 2x2 case. z_1 is either A or a. z_2 is either B or b. You have 4 obs: AB, Ab, aB, ab. Your (c) would define 4 groups and put 1 ob in each group. The cluster-robustness is completely lost. 2-way clustering defines 2 groups and is robust to clustering within the A/a and B/b groups. > I thought it would be > a. ivreg2 y x, cluster(z_1) > b. ivreg2 y x, cluster(z_2) > c. ivreg2 y x, cluster(z) where egen z = group(z_1 z_2) and > the two-way standard error on x would be the standard error > in a + the standard error in b - the standard error in c or > would it be sqrt(se(a)^2 + se(b)^2 - se(c)^2) > > Note. That is not the full model, but I thought would be > illustrative to get at the main issue. > > 2. Does ivreg2 adjust standard errors in anyway if 1 of the > clusters if small in number (e.g. 12 clusters in z_2)? > Should there be any adjustment made or does there not need to > be if z_1 is sufficiently large in size (e.g. 1000 clusters)? This is in the -ivreg2- help file, under "Small sample corrections": "If cluster is chosen, the finite sample adjustment qc = (N-1)/(N-K)*M/(M-1) if small, where M=number of clusters, qc = 1 otherwise. If 2-way clustering is used, M=min(M1,M2), where M1=number of clusters in group 1 and M2=number of clusters in group 2." Cheers, Mark > > I would be very grateful for any help you could provide. > * > * 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/ > -- Heriot-Watt University is a Scottish charity registered under charity number SC000278. Heriot-Watt University is the Sunday Times Scottish University of the Year 2011-2012 * * 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/

**References**:**st: IVREG2 and Multi-way Clustering***From:*Jessie C <jessiecoh@gmail.com>

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