Standard errors for panel data models with unknown clusters

DOI10.1016/J.JECONOM.2020.08.006MaRDI QIDQ6199637zbMATH OpenOpenAlexWikidataFDO

Authors Jushan Bai, Sung Hoon Choi, Yuan Liao

Publication date 21 March 2024

Published in Journal of Econometrics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1910.07406

zbMATH Keywords

clustered standard errorscross-sectional correlationheteroskedasticitypanel dataserial correlationthresholding

Mathematics Subject Classification ID

Statistics (62-XX) Game theory, economics, finance, and other social and behavioral sciences (91-XX)

Abstract: This paper develops a new standard-error estimator for linear panel data models. The proposed estimator is robust to heteroskedasticity, serial correlation, and cross-sectional correlation of unknown forms. The serial correlation is controlled by the Newey-West method. To control for cross-sectional correlations, we propose to use the thresholding method, without assuming the clusters to be known. We establish the consistency of the proposed estimator. Monte Carlo simulations show the method works well. An empirical application is considered.

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