At What Level Should One Cluster Standard Errors in Paired and Small-Strata Experiments?

65 Pages Posted: 10 Feb 2020 Last revised: 29 Jun 2023

See all articles by Clément de Chaisemartin

Clément de Chaisemartin

SciencesPo - Sciences Po - Department of Economics

Jaime Ramirez-Cuellar

Microsoft

Multiple version iconThere are 2 versions of this paper

Date Written: May 4, 2023

Abstract

In matched-pairs experiments in which one cluster per pair of clusters is assigned to treatment, to estimate treatment effects, researchers often regress their outcome on a treatment indicator and pair fixed effects, clustering standard errors at the unit-ofrandomization level. We show that even if the treatment has no effect, a 5%-level t-test based on this regression will wrongly conclude that the treatment has an effect up to 16.5% of the time. To fix this problem, researchers should instead cluster standard errors at the pair level. Using simulations, we show that similar results apply to clustered experiments with small strata.

Keywords: clustered standard errors, clustering, paired experiments, stratified experiments, randomized experiments, RCT

JEL Classification: C01, C12, C21, C9

Suggested Citation

de Chaisemartin, Clément and Ramirez-Cuellar, Jaime, At What Level Should One Cluster Standard Errors in Paired and Small-Strata Experiments? (May 4, 2023). Available at SSRN: https://ssrn.com/abstract=3520820 or http://dx.doi.org/10.2139/ssrn.3520820

Clément De Chaisemartin

SciencesPo - Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Jaime Ramirez-Cuellar (Contact Author)

Microsoft ( email )

14820 NE 36th Street
Redmond, WA 98122
United States

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