Nice. Good luck in getting it accepted! Methinks that if she clustered in the other two chapters, but not this one, she actually did try clustering and didn’t like what it showed… Not that I’m judging; we’ve all done it. I remember hearing a rumor in grad school that there was some time period in the 90s when there was a bug in stata, and basically all the standard errors are incorrect from that time.
Kinbote
Karma: 4
Very interesting analysis! I didn’t realize clustered standard errors weren’t in use pre-2000. Is there are reason you published this result here rather than as a letter in the AER?
I’m not sure I buy her last argument. Pascal’s Wager does seem like a reductio ad absurdum of expected utility theory. Because if you accepted, it then, by equivalent logic, you would have to perform every other belief, no matter how improbable, as long as it had an infinite payoff. For example, somebody could tell me that if I stepped on a crack, the universe will end. And since there’s a non-zero chance that they’re correct, I couldn’t step on any cracks ever again. As long as these potentially infinite payoff outcomes aren’t mutually exclusive, you would have to accept them. And there’s no bound on the number of them. Imagine being OCD in this world! Since this is clearly insane, there must be a fundamental flaw with how expected utility theory deals with infinities. Yet another reason to embrace virtue ethics :)
Seems doubtful as she published it in the American Economic Review after she’d completed her thesis. I’m surprised the reviewers didn’t require that clustered standard errors be shown, but I can only guess it wasn’t common back then.