For More Stars, Use XTREG Instead of AREG

I have a secret to share: I'm not sure that I ever realized (or thought much about the fact) that areg and xtreg produce different standard errors. Well, they do, and I have some good news: Often times, the right thing to do is the thing that produces the smaller standard errors! See Fiona Burlig's blog entry for more details.

I really like that she thought through the issue using simulations. Sometimes we spend hours googling answers to our questions when writing a quick little dofile would not only answer the question, but also help us really understand the question.

So, go back to that old project with the insignificant results. Did you use areg or xtreg? If you were to increase the sample size, would you necessarily increase the number of clusters?




Update: Forget xtreg!! Just use reghdfe, like the blog entry suggests! One of my colleagues just reminded me, "It gets the standard errors right, allows for two-way clustering and multiple high dimension fixed effects, and even does IV estimation."