We can apply the BDM findings and Hansen (2007a) results directly to this equation. Namely, if we estimate (8) by OLS – which means full year and group effects, along with x_{gt }– then the OLS estimator has satisfying properties as G and T both increase, provided v_{gt }: t 1, 2, . . . , T is a weakly dependent time series for all g. The simulations in BDM and Hansen (2007a) indicate that cluster-robust inference, where each cluster is a set of time periods, work reasonably well when

v

_{gt} follows a stable AR(1) model and G is

moderately large. ∙ Hansen (2007b), noting that the OLS estimator (the fixed effects estimator) applied to (8) is inefficient when v_{gt }is serially uncorrelated, proposes feasible GLS. When T is small, estimating

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