Inference with Few Heterogeneous Clusters

Rustam Ibragimov; Ulrich K. Müller

doi:10.1162/rest_a_00545

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Inference with Few Heterogeneous Clusters

Rustam Ibragimov¹; Ulrich K. Müller²

¹ Imperial College London · ² Princeton University

The Review of Economics and Statistics 2016

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.

DOI: 10.1162/rest_a_00545
Volume: 98 (1)
Pages: 83-96
Language: en
Export: BibTeX
Sources: openalex crossref