IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Bootstrap-Based Improvements for Inference with Clustered Errors

  • Doug Miller
  • A. Colin Cameron
  • Jonah B. Gelbach

    (Department of Economics, University of California Davis)

Microeconometrics researchers have increasingly realized the essential need to account for any within-group dependence in estimating standard errors of regression parameter estimates. The typical preferred solution is to calculate cluster-robust or sandwich standard errors that permit quite general heteroskedasticity and within-cluster error correlation, but presume that the number of clusters is large. In applications with few (5-30) clusters, standard asymptotic tests can over-reject considerably. We investigate more accurate inference using cluster bootstrap-t procedures that provide asymptotic refinement. These procedures are evaluated using Monte Carlos, including the much-cited differences-in-differences example of Bertrand, Mullainathan and Duflo (2004). In situations where standard methods lead to rejection rates in excess of ten percent (or more) for tests of nominal size 0.05, our methods can reduce this to five percent. In principle a pairs cluster bootstrap should work well, but in practice a Wild cluster bootstrap performs better.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://wp.econ.ucdavis.edu/06-21.pdf
Download Restriction: no

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 621.

as
in new window

Length: 52
Date of creation: 14 Jul 2006
Date of revision:
Handle: RePEc:cda:wpaper:06-21
Contact details of provider: Postal: One Shields Ave., Davis, CA 95616-8578
Phone: (530) 752-0741
Fax: (530) 752-9382
Web page: http://www.econ.ucdavis.edu
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228 Elsevier.
  2. Kloek, T, 1981. "OLS Estimation in a Model Where a Microvariable Is Explained by Aggregates and Contemporaneous Disturbances Are Equicorrelated," Econometrica, Econometric Society, vol. 49(1), pages 205-07, January.
  3. Franklin Satterthwaite, 1941. "Synthesis of variance," Psychometrika, Springer, vol. 6(5), pages 309-316, October.
  4. Russell Davidson & Emmanuel Flachaire, 2001. "The Wild Bootstrap, Tamed at Last," Working Papers 1000, Queen's University, Department of Economics.
  5. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
  6. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
  7. Macpherson, David A & Hirsch, Barry T, 1995. "Wages and Gender Composition: Why Do Women's Jobs Pay Less?," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 426-71, July.
  8. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2007. "Bootstrap-Based Improvements for Inference with Clustered Errors," NBER Technical Working Papers 0344, National Bureau of Economic Research, Inc.
  9. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  10. Jonathan Gruber & James M. Poterba, 1993. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," NBER Working Papers 4435, National Bureau of Economic Research, Inc.
  11. James G. MacKinnon, 2002. "Bootstrap inference in econometrics," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 615-645, November.
  12. Rothenberg, Thomas J, 1988. "Approximate Power Functions for Some Robust Tests of Regression Coefficients," Econometrica, Econometric Society, vol. 56(5), pages 997-1019, September.
  13. Michael Baker & Nicole M. Fortin, 1999. "Occupational Gender Composition and Wages in Canada: 1987-1988," NBER Working Papers 7371, National Bureau of Economic Research, Inc.
  14. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  15. Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics 9602009, EconWPA, revised 05 Mar 1996.
  16. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
  17. Joshua D. Angrist & Victor Lavy, 2002. "The Effect of High School Matriculation Awards: Evidence from Randomized Trials," NBER Working Papers 9389, National Bureau of Economic Research, Inc.
  18. Greenwald, Bruce C., 1983. "A general analysis of bias in the estimated standard errors of least squares coefficients," Journal of Econometrics, Elsevier, vol. 22(3), pages 323-338, August.
  19. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
  20. Chesher, Andrew & Austin, Gerard, 1991. "The finite-sample distributions of heteroskedasticity robust Wald statistics," Journal of Econometrics, Elsevier, vol. 47(1), pages 153-173, January.
  21. Davidson, Russell & MacKinnon, James G., 1999. "The Size Distortion Of Bootstrap Tests," Econometric Theory, Cambridge University Press, vol. 15(03), pages 361-376, June.
  22. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  23. Chesher, Andrew & Jewitt, Ian, 1987. "The Bias of a Heteroskedasticity Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 55(5), pages 1217-22, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:06-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.