Inference with difference-in-differences revisited

Publication type

Journal Article

Authors

Publication date

January 15, 2018

Summary:

A growing literature on inference in difference-in-differences (DiD) designs has been pessimistic about obtaining hypothesis tests of the correct size, particularly with few groups. We provide Monte Carlo evidence for four points: (i) it is possible to obtain tests of the correct size even with few groups, and in many settings very straightforward methods will achieve this; (ii) the main problem in DiD designs with grouped errors is instead low power to detect real effects; (iii) feasible GLS estimation combined with robust inference can increase power considerably whilst maintaining correct test size – again, even with few groups, and (iv) using OLS with robust inference can lead to a perverse relationship between power and panel length.

Published in

Journal of Econometric Methods

Volume

Volume: 7

DOI

https://doi.org/10.1515/jem-2017-0005

ISSN

21566674

Subjects

Link

- http://repository.essex.ac.uk/id/eprint/20372

Notes

Open Access

©2018 Thomas F. Crossley et al., published by De Gruyter. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License. BY-NC-ND 4.0

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• Inference with difference-in-differences revisited

  1. Mike Brewer
  2. Thomas F. Crossley
  3. Robert Joyce

  Research Paper
  November 15, 2013