plm (version 1.5-12)

vcovDC: Double-Clustering Robust Covariance Matrix Estimator

Description

High-level convenience wrapper for double-clustering robust covariance matrix estimators a la Thompson (2011) and Cameron, Gelbach and Miller (2011) for panel models.

Usage

"vcovDC"(x, type = c("HC0", "sss", "HC1", "HC2", "HC3", "HC4"), ...)

Arguments

x

an object of class "plm"

type

one of "HC0", "sss", "HC1", "HC2", "HC3", "HC4",

...

further arguments

Value

An object of class "matrix" containing the estimate of the covariance matrix of coefficients.

Details

vcovDC is a function for estimating a robust covariance matrix of parameters for a panel model with errors clustering along both dimensions. The function is a convenience wrapper simply summing a group- and a time-clustered covariance matrix and subtracting a diagonal one a la White.

Weighting schemes are analogous to those in vcovHC in package sandwich and are justified theoretically (although in the context of the standard linear model) by MacKinnon and White (1985) and Cribari-Neto (2004) (see Zeileis (2004)).

The main use of vcovDC is to be an argument to other functions, e.g. for Wald-type testing: as vcov to coeftest(), waldtest() and other methods in the lmtest package; and as vcov to linearHypothesis() in the car package (see the examples). Notice that the vcov argument may be supplied a function (which is the safest) or a matrix (see Zeileis (2004), 4.1-2 and examples below).

References

Cameron, A.C., Gelbach, J.B., & Miller, D.L. (2011) Robust inference with multiway clustering, Journal of Business and Economic Statistics 29(2), pp. 238--249. Thompson, S.B. (2011) Simple formulas for standard errors that cluster by both firm and time, Journal of Financial Economics 99(1), pp. 1--10.

Examples

library(lmtest)
library(car)
data("Produc", package="plm")
zz <- plm(log(gsp)~log(pcap)+log(pc)+log(emp)+unemp, data=Produc, model="pooling")
## standard coefficient significance test
coeftest(zz)
## DC robust significance test, default
coeftest(zz, vcov=vcovDC)
## idem with parameters, pass vcov as a function argument
coeftest(zz, vcov=function(x) vcovDC(x, type="HC1", maxlag=4))
## joint restriction test
waldtest(zz, update(zz, .~.-log(emp)-unemp), vcov=vcovDC)
## test of hyp.: 2*log(pc)=log(emp)
linearHypothesis(zz, "2*log(pc)=log(emp)", vcov=vcovDC)