MacKinnon, James G.; Webb, Matthew D. - Economics Department, Queen's University - 2015
The cluster robust variance estimator (CRVE) relies on the number of clusters being large. A shorthand "rule of 42 … clusters is treated. We explain why this happens, study the ``effective number'' of clusters, and simulate placebo laws with … critical values based on the wild cluster bootstrap performs much better. However, this procedure fails when a small number of …