(Empirical) Bayes Approaches to Parallel Trends

Soonwoo Kwon and Jonathan Roth

AEA Papers and Proceedings, 2024, vol. 114, 606-09

Abstract: We consider Bayes and Empirical Bayes (EB) approaches for dealing with violations of parallel trends. In the Bayes approach, the researcher specifies a prior over both the pretreatment violations of parallel trends δpre and the posttreatment violations δpost. The researcher then updates their posterior about the posttreatment bias δpost given an estimate of the pre-trends δpre. This allows them to form posterior means and credible sets for the treatment effect of interest, δpost. In the EB approach, the prior on the violations of parallel trends is learned from the pretreatment observations. We illustrate these approaches in two empirical applications.

JEL-codes: C11 C21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/pandp.20241048

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