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Editor: Universidad Carlos III de Madrid. Departamento de Economía

Issued date: 2012-12

Revision date: 2013-04-04

ISSN: 2340-5031

Sponsor: Bothauthors acknowledge financial help from the Spanish government through grant ECO2012-31358

Serie-No.: UC3M Working papers. Economics12-33

Project: Gobierno de España. ECO2012-31358

Keywords: Difference-in-differences , Parallel paths , Treatment effect

Rights: Atribución-NoComercial-SinDerivadas 3.0 España

Abstract:The core assumption to identify the treatment effect in difference-in-differences estimators is theso-called Parallel Paths assumption, namely that the average change in outcome for the treated inthe absence of treatment equals the average change in outcomThe core assumption to identify the treatment effect in difference-in-differences estimators is theso-called Parallel Paths assumption, namely that the average change in outcome for the treated inthe absence of treatment equals the average change in outcome for the non-treated. We define afamily of alternative Parallel assumptions and show for a number of frequently used empiricalspecifications which parameters of the model identify the treatment effect under the alternativeParallel assumptions. We further propose a fully flexible model which has two desirable featuresnot present in the usual econometric specifications implemented in applied research. First, itallows for flexible dynamics and for testing restrictions on these dynamics. Second, it does notimpose equivalence between alternative Parallel assumptions. We illustrate the usefulness of ourapproach by revising the results of several recent papers in which the difference-in-differencestechnique has been applied.The core assumption to identify the treatment effect in difference-in-differences estimators is theso-called Parallel Paths assumption, namely that the average change in outcome for the treated inthe absence of treatment equals the average change in outcome for the non-treated. We define afamily of alternative Parallel assumptions and show for a number of frequently used empiricalspecifications which parameters of the model identify the treatment effect under the alternativeParallel assumptions. We further propose a fully flexible model which has two desirable featuresnot present in the usual econometric specifications implemented in applied research. First, itallows for flexible dynamics and for testing restrictions on these dynamics. Second, it does notimpose equivalence between alternative Parallel assumptions. We illustrate the usefulness of ourapproach by revising the results of several recent papers in which the difference-in-differencestechnique has been applied+-





Author: Mora, Ricardo; Reggio, Iliana

Source: http://e-archivo.uc3m.es



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