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Inference with Few Heterogeneous Clusters

Author(s): Ibragimov, Rustam; Mueller, Ulrich K

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Abstract: Suppose estimating a model on each of a small number of potentially heterogeneous clusters yields approximately independent, unbiased, and Gaussian parameter estimators. We make two contributions in this setup. First, we show how to compare a scalar parameter of interest between treatment and control units using a two-sample t-statistic, extending previous results for the one-sample t-statistic. Second, we develop a test for the appropriate level of clustering; it tests the null hypothesis that clustered standard errors from a much finer partition are correct. We illustrate the approach by revisiting empirical studies involving clustered, time series, and spatially correlated data.
Publication Date: 4-Mar-2016
Citation: Ibragimov, Rustam, Mueller, Ulrich K. (2016). Inference with Few Heterogeneous Clusters. REVIEW OF ECONOMICS AND STATISTICS, 98 (1), 83 - 96. doi:10.1162/REST_a_00545
DOI: doi:10.1162/REST_a_00545
ISSN: 0034-6535
EISSN: 1530-9142
Pages: 83 - 96
Type of Material: Journal Article
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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