American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects
American Economic Review
vol. 110,
no. 9, September 2020
(pp. 2964–96)
Abstract
Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator.Citation
de Chaisemartin, Clément, and Xavier D'Haultfœuille. 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects." American Economic Review, 110 (9): 2964–96. DOI: 10.1257/aer.20181169Additional Materials
JEL Classification
- C21 Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
- C23 Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- J31 Wage Level and Structure; Wage Differentials
- J51 Trade Unions: Objectives, Structure, and Effects
- L82 Entertainment; Media