Estimating dynamic treatment effects in event studies with heterogeneous treatment effects

Liyang Sun and Sarah Abraham

Journal of Econometrics, 2021, vol. 225, issue 2, 175-199

Abstract: To estimate the dynamic effects of an absorbing treatment, researchers often use two-way fixed effects regressions that include leads and lags of the treatment. We show that in settings with variation in treatment timing across units, the coefficient on a given lead or lag can be contaminated by effects from other periods, and apparent pretrends can arise solely from treatment effects heterogeneity. We propose an alternative estimator that is free of contamination, and illustrate the relative shortcomings of two-way fixed effects regressions with leads and lags through an empirical application.

Keywords: Difference-in-differences; Two-way fixed effects; Pretrend test (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1204)

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Working Paper: Estimating Dynamic Treatment Effects in Event Studies with Heterogeneous Treatment Effects (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:225:y:2021:i:2:p:175-199

DOI: 10.1016/j.jeconom.2020.09.006

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