Suppose you were investigating the observed wage gap in urban China, where men are paid approximately 30% more than women. The first thing you would like to know is whether the higher wages paid to men are a result of the greater average years of schooling and years in the labor force that men have or whether, instead, men are paid more even after accounting for education and experience. If the latter situation is the case then the difference in wages may at least in part be due to labor market discrimination.
Tools of the Trade
For many years, researchers have recognized the need to correct standard error estimates for observational dependence within clusters. An earlier post contrasted the typical approach to this matter, the cluster robust standard error (CRSE), and various methods to cluster bootstrap the standard error.
Random lotteries to allocate scarce slots for an oversubscribed program provide a useful tool for estimating impacts of such a program. However, an issue which can arise in practice is that there may be multiple lotteries that an individual can apply for. For example,
This is a joint post with Miriam Bruhn.