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From |
Jessie C <jessiecoh@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

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

Date |
Sun, 29 Jan 2012 18:23:31 -0500 |

Mark, Thank you for your continued patience. I am very grateful for you continuing to take the time to help. I am confused though as to why what I did was just a coincidence. I looked around some more and just found another paper by Cameron and Gelbach: www.econ.ucdavis.edu/working_papers/10-7.pdf, p. 14 It says that the two-way clustering is based on a one-way clustering formula: "For two-way clustering this robust variance estimator is easy to implement given software that computes the usual one-way cluster-robust estimate. We obtain three different cluster-robust \variance" matrices for the estimator by one-way clustering in, respectively, the first dimension, the second dimension, and by the intersection of the first and second dimensions. Then add the first two variance matrices and, to account for double-counting, subtract the third. Thus V_{two-way}(beta) = V_1(beta) + V_2(beta) - V{1 intersection 2}(beta)." On Sun, Jan 29, 2012 at 4:42 PM, Jessie C <jessiecoh@gmail.com> wrote: > Mark, > > Thank you very much for your response and for taking the time to help > out. I greatly appreciate it. > > 1. Your example makes sense of the 2 X 2. z_1 has 2 clusters. z_2 > has 2 clusters. The union of z_1 and z_2 is 4 clusters but also 4 > observations. > > I don't quite understand then the 2-way clustering formula in terms of > 1-way clusters. > > Cameron, Gelbach, and Miller say: > > 1. OLS regression of y on X with variance matrix estimate computed > using clustering on g in the set of {1, 2, ...G}; > 2. OLS regression of y on X with variance matrix estimate computed > using clustering on h in the set of {1, 2, ...H}; > 3. OLS regression of y on X with variance matrix estimate computed > using clustering on (g, h) in the set of {(1, 1), ..., (G, H)}; > > Given these three components, V[beta] is computed as the sum of the > …first and second components, minus the third component. > > I thought that would correspond with: > i. reg y x, cluster(g) > ii. reg y x, cluster(h) > iii. reg y x, cluster(i) where egen i = group(g h) > and the standard error is se(i) + se(ii) - se(iii) or > sqrt(se(i)^2 + se(ii)^2 - se(iii)^2) > > I tried an example in Stata and it worked out using the sqrt formula. > Not sure if that's just a coincidence. > * * 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/

**Follow-Ups**:**st: RE: Re: IVREG2 and Multi-way Clustering***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

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

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

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