Cluster-Robust Inference: A Guide to Empirical Practice

James G. Mackinnon*, Morten Ørregaard Nielsen, Matthew D. Webb

*Corresponding author for this work

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Abstract

Methods for cluster-robust inference are routinely used in economics and many other disciplines. However, it is only recently that theoretical foundations for the use of these methods in many empirically relevant situations have been developed. In this paper, we use these theoretical results to provide a guide to empirical practice. We do not attempt to present a comprehensive survey of the (very large) literature. Instead, we bridge theory and practice by providing a thorough guide on what to do and why, based on recently available econometric theory and simulation evidence. To practice what we preach, we include an empirical analysis of the effects of the minimum wage on labor supply of teenagers using individual data.

Original languageEnglish
JournalJournal of Econometrics
Volume232
Issue2
Pages (from-to)272-299
Number of pages28
ISSN0304-4076
DOIs
Publication statusPublished - Feb 2023

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