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Robust Inference With Multiway Clustering

Author

Listed:
  • A. Colin Cameron
  • Jonah B. Gelbach
  • Douglas L. Miller

Abstract

In this article we propose a variance estimator for the OLS estimator as well as for nonlinear estimators such as logit, probit, and GMM. This variance estimator enables cluster-robust inference when there is two-way or multiway clustering that is nonnested. The variance estimator extends the standard cluster-robust variance estimator or sandwich estimator for one-way clustering (e.g., Liang and Zeger 1986; Arellano 1987) and relies on similar relatively weak distributional assumptions. Our method is easily implemented in statistical packages, such as Stata and SAS, that already offer cluster-robust standard errors when there is one-way clustering. The method is demonstrated by a Monte Carlo analysis for a two-way random effects model; a Monte Carlo analysis of a placebo law that extends the state--year effects example of Bertrand, Duflo, and Mullainathan (2004) to two dimensions; and by application to studies in the empirical literature where two-way clustering is present.

Suggested Citation

  • A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(2), pages 238-249, April.
    • Handle: RePEc:taf:jnlbes:v:29:y:2011:i:2:p:238-249
    DOI: 10.1198/jbes.2010.07136
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    References listed on IDEAS

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    1. Gabor Kezdi, 2005. "Robus Standard Error Estimation in Fixed-Effects Panel Models," Econometrics 0508018, University Library of Munich, Germany.
    2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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