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Cluster-Corrected Standard Errors with Exact Locations Known: An Example from Rural Indonesia

Author

Listed:
  • John Gibson

    () (University of Waikato)

  • Bonggeun Kim

    () (Seoul National University)

  • Susan Olivia

    () (Monash University)

Abstract

Cluster-corrected standard errors are widely used but may sometimes be inappropriate since household surveys are increasingly geo-referenced. Compared with the appropriate spatial error models that use details on exact locations, cluster corrections impose untested restrictions on spatial correlations. Our example from rural Indonesia suggests cluster corrections are too conservative and may cause inference errors.

Suggested Citation

  • John Gibson & Bonggeun Kim & Susan Olivia, 2014. "Cluster-Corrected Standard Errors with Exact Locations Known: An Example from Rural Indonesia," Economics Bulletin, AccessEcon, vol. 34(3), pages 1857-1863.
  • Handle: RePEc:ebl:ecbull:eb-14-00083
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I3-P171.pdf
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    References listed on IDEAS

    as
    1. John Gibson & David McKenzie, 2007. "Using the Global Positioning System (GPS) in Household Surveys For Better Economics and Better Policy," Working Papers in Economics 07/04, University of Waikato.
    2. Pepper, John V., 2002. "Robust inferences from random clustered samples: an application using data from the panel study of income dynamics," Economics Letters, Elsevier, vol. 75(3), pages 341-345, May.
    3. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-965, July.
    4. Alberto Isgut, 2004. "Non-farm Income and Employment in Rural Honduras: Assessing the Role of Locational Factors," Journal of Development Studies, Taylor & Francis Journals, vol. 40(3), pages 59-86.
    5. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Cluster-corrections; GPS; non-farm enterprises; spatial correlation;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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