Two-way fixed effects and differences-in-differences estimators with several treatments

Clément de Chaisemartin and D’Haultfœuille, Xavier

Journal of Econometrics, 2023, vol. 236, issue 2

Abstract: We study two-way-fixed-effects regressions (TWFE) with several treatment variables. Under a parallel trends assumption, we show that the coefficient on each treatment identifies a weighted sum of that treatment’s effect, with possibly negative weights, plus a weighted sum of the effects of the other treatments. Thus, those estimators are not robust to heterogeneous effects and may be contaminated by other treatments’ effects. We further show that omitting a treatment from the regression can actually reduce the estimator’s bias, unlike what would happen under constant treatment effects. We propose an alternative difference-in-differences estimator, robust to heterogeneous effects and immune to the contamination problem. In the application we consider, the TWFE regression identifies a highly non-convex combination of effects, with large contamination weights, and one of its coefficients significantly differs from our heterogeneity-robust estimator.

Keywords: Differences-in-differences; Two-way-fixed-effects regressions; Multiple treatments; Heterogeneous treatment effects (search for similar items in EconPapers)
JEL-codes: C21 C23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Two-way Fixed Effects and Differences-in-Differences Estimators with Several Treatments (2023)
Working Paper: Two-way fixed effects and differences-in-differences estimators with several treatments (2023)
Working Paper: Two-way fixed effects and differences-in-differences estimators with several treatments (2023)
Working Paper: Two-way Fixed Effects and Differences-in-Differences Estimators with Several Treatments (2022)
Working Paper: Two-way Fixed Effects and Differences-in-Differences Estimators with Several Treatments (2022)
Working Paper: Two-way Fixed Effects and Differences-in-Differences Estimators with Several Treatments (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:236:y:2023:i:2:s0304407623001963

DOI: 10.1016/j.jeconom.2023.105480

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