American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Pre-event Trends in the Panel Event-Study Design
American Economic Review
vol. 109,
no. 9, September 2019
(pp. 3307–38)
Abstract
We consider a linear panel event-study design in which unobserved confounds may be related both to the outcome and to the policy variable of interest. We provide sufficient conditions to identify the causal effect of the policy by exploiting covariates related to the policy only through the confounds. Our model implies a set of moment equations that are linear in parameters. The effect of the policy can be estimated by 2SLS, and causal inference is valid even when endogeneity leads to pre-event trends ("pre-trends") in the outcome. Alternative approaches perform poorly in our simulations.Citation
Freyaldenhoven, Simon, Christian Hansen, and Jesse M. Shapiro. 2019. "Pre-event Trends in the Panel Event-Study Design." American Economic Review, 109 (9): 3307–38. DOI: 10.1257/aer.20180609Additional Materials
JEL Classification
- C23 Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
- C26 Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation