Re: st: Changes to two way clustering ivreg2 update

[Christopher Baum <kit.baum@bc.edu>]

<>
On Jan 31, 2011, at 2:33 AM, Samuel wrote:

> Were there changes implemented in the updated -(xt)ivreg2- calculation
> of standard errors in the case of two-way clustering? After updating
> to the most recent version of -ivreg2- one week ago, I am unable to
> replicate earlier results on standard errors from cross-country panel
> regressions with clustering on country and year. Point estimates and
> one-way clustering results remain unchanged. I've scoured the detailed
> update/version log but found nothing immediately relevant to this
> issue. The old version of -ivreg2- was 3.0.01 8Feb2010. The new
> version is 3.0.05 17June2010. -xtivreg2- was in both cases the 1.0.11
> 17June2010 version. Prior estimates were therefore based on a pairing
> of 1.0.11 -xtivreg2- and 3.0.01 -ivreg2-, while new estimates were
> based on 3.0.05 -ivreg2-. Also, all estimates were performed on Stata
> version 10.1.
> 
> On a possibly related note, I now find that two-way clustering (with
> the updated program) produces standard errors that are in some cases
> smaller than and in all cases much closer to the one-way clustering
> (on country) results. I understand how this can arise mathematically
> but fail to grasp why the new two-way clustered std errors are so much
> smaller than ones implemented with the older version of the program.
> 
> Have there been any changes in internal programs across these versions
> of -ivreg2-? The fact that neither the point estimates nor the one-way
> clustered std errors change leads me to believe that something differs
> in the underlying -(xt)ivreg2- programs used to generate the two-way
> clustered var-covar matrix.

Mark Schaffer is better able to respond to this question, and I imagine he will. 
Yesterday's announced update to -ivreg2- should not have had anything to do with these issues. Note, however,
that the current version of ivreg2.ado is 3.0.06 of 30jan2011. The 3.0.05 version was circulated
on 17jun2010, as you note. No change was made in yesterday's update to xtivreg2.

Kit

Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
                              An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html


*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/