Can we trust cluster-corrected standard errors? An application of spatial autocorrelation with exact locations known

Can we trust cluster-corrected standard errors? An application of spatial autocorrelation with exact locations known

Gibson, John ; Kim, Bonggeun ; Olivia, Susan

Identifier: http://hdl.handle.net/10289/4945

Date: 2010

Citation: Gibson, J., Kim, B. & Olivia, S. (2010). Can we trust cluster-corrected standard errors? An application of spatial autocorrelation with exact locations known. (Department of Economics Working Paper Series, Number 10/07). Hamilton, New Zealand: University of Waikato.

Series: Department of Economics Working Paper Series

Report No.: 10/07

Abstract:

Standard error corrections for clustered samples impose untested restrictions on spatial correlations. Our example shows these are too conservative, compared with a spatial error model that exploits information on exact locations of observations, causing inference errors when cluster corrections are used.

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