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Corrected Standard Errors with Clustered Data

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  • Jackson, John E.

Abstract

The use of cluster robust standard errors (CRSE) is common as data are often collected from units, such as cities, states or countries, with multiple observations per unit. There is considerable discussion of how best to estimate standard errors and confidence intervals when using CRSE (Harden 2011; Imbens and Kolesár 2016; MacKinnon and Webb 2017; Esarey and Menger 2019). Extensive simulations in this literature and here show that CRSE seriously underestimate coefficient standard errors and their associated confidence intervals, particularly with a small number of clusters and when there is little within cluster variation in the explanatory variables. These same simulations show that a method developed here provides more reliable estimates of coefficient standard errors. They underestimate confidence intervals for tests of individual and sets of coefficients in extreme conditions, but by far less than do CRSE. Simulations also show that this method produces more accurate standard error and confidence interval estimates than bootstrapping, which is often recommended as an alternative to CRSE.

Suggested Citation

  • Jackson, John E., 2020. "Corrected Standard Errors with Clustered Data," Political Analysis, Cambridge University Press, vol. 28(3), pages 318-339, July.
  • Handle: RePEc:cup:polals:v:28:y:2020:i:3:p:318-339_2
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    Cited by:

    1. Kai Zhao & Bintong Yu & Xiaoting Yang, 2023. "The Agricultural–Ecological Benefit of Digital Inclusive Finance Development: Evidence from Straw Burning in China," Sustainability, MDPI, vol. 15(4), pages 1-14, February.
    2. Phong, Truong Ngoc & Thang, Vo Tat & Hoai, Nguyen Trong, 2021. "What motivates farmers to accept good aquaculture practices in development policy? Results from choice experiment surveys with small-scale shrimp farmers in Vietnam," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 454-469.
    3. Li, Shenyu & Popkowsky Leszczyc, Peter T.L. & Qiu, Chun, 2023. "International retailer performance: Disentangling the interplay between rule of law and culture," Journal of Retailing, Elsevier, vol. 99(2), pages 193-209.

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