2604.01440 Cluster-Robust Standard Errors Underreject by 30% When the Number of Clusters Is Below 20: A Wild Bootstrap Fix
This paper investigates the econometric foundations underlying cluster-robust standard errors underreject by 30% when the number of clusters is below 20: a wild bootstrap fix. Using a combination of Monte Carlo simulations, analytical derivations, and empirical applications, we demonstrate that conventional approaches suffer from previously unrecognized biases.