Researchers have increasingly realized the need to account for within-group dependence in estimating standard errors of regression parameter estimates. The usual solution is to calculate cluster-robust standard errors that permit heteroskedasticity and within-cluster error correlation, but presume that the number of clusters is large. Standard asymptotic tests can over-reject, however, with few (five to thirty) clusters. We investigate inference using cluster bootstrap-t procedures that provide asymptotic refinement. These procedures are evaluated using Monte Carlos, including the example of Bertrand, Duflo, and Mullainathan (2004). Rejection rates of 10% using standard methods can be reduced to the nominal size of 5% using our methods.

We investigate the impact of peer interaction on the quality of financial decision making in a laboratory experiment. Face-to-face communication with a randomly assigned peer significantly improves the quality of subsequent private decisions even though simple mimicry would have the opposite effect. We present evidence that the mechanism involves general conceptual learning (because the benefits of communication extend to previously unseen tasks), and that the most effective learning relationships are horizontal rather than vertical (because people with weak skills benefit most when their partners also have weak skills). The benefits of demonstrably effective financial education do not propagate to peers.

Abortion legalization in the early 1970s led to dramatic changes in fertility. Some research has suggested that it altered cohort outcomes, but this literature has been limited and controversial. In this paper, we provide a framework for understanding selection mechanisms and use that framework to both address inconsistent past methodological approaches and provide evidence on the long-run impact on cohort characteristics. Our results indicate that lower-cost abortion brought about by legalization altered young adult outcomes through selection. In particular, it increased likelihood of college graduation, lower rates of welfare use, and lower odds of being a single parent.