Hello,

I'm currently working on some experimental data. The experimental design consists of two treatments. In each treatment, 20 subjects are randomly matched in pairs and participate to a simple game. The game is repeated for 20 periods. In each period, the pairs are randomly re-matched and a single decision is made.

I estimate the effect of the treatment with a model that includes individual random effects, session dummies and some lagged variables (to control for dynamic session effects). When I estimate the cluster-robust covariance matrix, with the xtreg_re option vce(cluster Session), the standard errors are smaller than the unclustered ones; when I exclude the session dummies, the cluster-robust standard errors become larger than the unclustered ones.

I read the article http://www.stata.com/support/faqs/st...luster-option/ on the comparison of the standard errors for robust, cluster, and standard estimators. I understand that there must be a cancellation of variation when the residuals are summed over clusters, but it's not clear to me why this happen when I include fixed effects for the clusters?

Thanks,

Giancarlo

I'm currently working on some experimental data. The experimental design consists of two treatments. In each treatment, 20 subjects are randomly matched in pairs and participate to a simple game. The game is repeated for 20 periods. In each period, the pairs are randomly re-matched and a single decision is made.

I estimate the effect of the treatment with a model that includes individual random effects, session dummies and some lagged variables (to control for dynamic session effects). When I estimate the cluster-robust covariance matrix, with the xtreg_re option vce(cluster Session), the standard errors are smaller than the unclustered ones; when I exclude the session dummies, the cluster-robust standard errors become larger than the unclustered ones.

I read the article http://www.stata.com/support/faqs/st...luster-option/ on the comparison of the standard errors for robust, cluster, and standard estimators. I understand that there must be a cancellation of variation when the residuals are summed over clusters, but it's not clear to me why this happen when I include fixed effects for the clusters?

Thanks,

Giancarlo

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