st: RE: Changes to two way clustering ivreg2 update

["Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>]

Sam,

There was a bug fix in 3.0.04 that might be the explanation.  This is
the one in the notes at the bottom of ivreg2.ado that refers to a bug
relating to cluster+kernel, which is a specific case of 2-way
clustering.

In any case, if you contact me off-list with more details, I can
investigate and see if I can track down the source of the change.

Yours,
Mark (ivreg2 co-author)

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Samuel Bazzi
> Sent: Monday, January 31, 2011 1:02 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Changes to two way clustering ivreg2 update
> 
> 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.
> 
> Thanks for your consideration.
> 
> -Sam
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