When Should Pre-trends Be Parallel?

Dalia Ghanem, Pedro H. C. Sant’Anna and Kaspar Wüthrich

AEA Papers and Proceedings, 2026, vol. 116, 64-69

Abstract: We analyze pre-trends tests through the lens of how units select into treatment. We derive necessary and sufficient conditions for pre-trends and trends to be parallel with and without covariates. These conditions show that even in the absence of structural breaks, pre-trends tests can be uninformative about parallel trends, except under specific restrictions on selection. Thus, correctly interpreting pre-trends tests requires an understanding of the units’ selection behavior, and pre-trends tests cannot replace economic arguments for parallel trends. We document additional issues with pre-trends tests when researchers control for pre-treatment values of time-varying covariates.

JEL-codes: C21 C23 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/pandp.20261109

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