Robust Standard Errors in Small Samples: Some Practical Advice

Robust Standard Errors in Small Samples: Some Practical Advice

By
Guido W. Imbens, Michal Kolesar
The Review of Economics and Statistics . October
2016, Vol. 98, Issue 4, Pages 701-712

We study the properties of heteroskedasticity-robust confidence intervals for regression parameters. We show that confidence intervals based on a degrees-of-freedom correction suggested by Bell and McCaffrey (2002) are a natural extension of a principled approach to the Behrens-Fisher problem. We suggest a further improvement for the case with clustering. We show that these standard errors can lead to substantial improvements in coverage rates even for samples with fifty or more clusters.We recommend that researchers routinely calculate the Bell-McCaffrey degrees-of-freedom adjustment to assess potential problems with conventional robust standard errors.