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Abstract

When there are few treated clusters in a pure treatment or difference-in-differences setting, t tests based on a cluster-robust variance estimator (CRVE) can severely over- reject. Although procedures based on the wild cluster bootstrap often work well when the number of treated clusters is not too small, they can either over-reject or under- reject seriously when it is. In a previous paper, we showed that procedures based on randomization inference (RI) can work well in such cases. However, RI can be imprac- tical when the number of clusters is small. We propose a bootstrap-based alternative to randomization inference, which mitigates the discrete nature of RI P values in the few-clusters case.

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