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...standard errors using the Fama-MacBeth procedure (Fama-MacBeth, 1973). Twenty-nine percent of the papers included dummy variables for each cluster (e.g. fixed effects). The next two most common methods used OLS (or an analogous method) to estimate the coefficients but reported standard errors adjusted for correlation within a cluster. Seven percent of the papers adjusted the standard errors using the 2 Newey-West procedure (Newey and West, 1987) modified for use in a panel data set, while 23 percent of the papers reported clustered standard errors (Williams, 2000, Rogers, 1993, Andrews, 1991, Moulton, 1990, Arellano, 1987, Moulton, 1986) which are White standard errors adjusted to account for possible correlation within a cluster. These are also called Rogers standard errors. Although the literature has used a diversity of methods to estimate standard errors in panel data sets, the chosen method is often incorrect and the literature provides little guidance to researchers as to which method should be used. Since the methods sometimes produce incorrect estimates, it is important to understand how the methods compare and how to select the correct one. That is this paper’s objective. There are two...

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...nd other public services). The benchmark is thus the agricultural sector (plus domestic services provided to households). To control for firm size we use a dummy equal to one if the workers' company has less than 100 employees. 15 The breakdown available for job status is the following: a) office worker; b) school teacher; c) worker supervisor or junior manager; d) manager, senior official, principal, headmaster, university professor, magistrate. Our benchmark is bluecollar workers (including apprentices and home-workers). 16 This is a standard correction in the literature (see, among others, Moulton, 1990). 17 Note that the reason why in the third specification (columns (A5.3) and (A5.6)) the schooling coefficients are always lower than in the other regressions may derive from the correlation between education and job status. 12 raises wages by 0.01 percent only. This last result is not surprising in the light of the consideration that the Italian wage bargaining system is still centralized to a large extent, which smoothes the agglomeration economy effect when we impose a linear relationship between earnings and population size. 4.1 Robustness checks In this section we test whether our urban w...

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...ators may be inconsistent. In addition, the community prosecution strategy affects multiple police beats, raising the possibility that common group errors may bias estimated standard errors downward (=-=Moulton, 1990-=-). Accordingly, two sets of standard errors, one clustered at the level of police beats and the other clustered at the level of police districts, are reported for each regression coefficient. 5. Resul...

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...charged for each individual is determined by the same contract. In this case, estimation of equation (1) via ordinary least squares (OLS) leads to standard errors that are typically downwards biased (=-=Moulton, 1990-=-; Bertrand et al., 2004). A simple example demonstrates this point. Suppose there are two hospitals, the merging hospital h and a control hospital h . For the merging hospital, the log price change fr...