Pre-event Trends in the Panel Event-Study Design

Simon Freyaldenhoven, Christian Hansen and Jesse Shapiro

American Economic Review, 2019, vol. 109, issue 9, 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.

JEL-codes: C23 C26 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20180609
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Citations: View citations in EconPapers (124)

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Working Paper: Pre-event Trends in the Panel Event-study Design (2019)
Working Paper: Pre-event Trends in the Panel Event-study Design (2018)
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