Flexible difference-in-differences estimator

Thomas Persson

Journal of Economics and Econometrics, 2025, vol. 68, issue 1, 73-96

Abstract: This paper introduces a novel estimator designed to estimate treatment effects in difference-in-differences (DiD) settings with staggered treatment adoption, treatment effect heterogeneity, and repeated cross-sectional data. In such contexts, treatment effects may vary across groups, time periods, and individual covariates, necessitating a more flexible approach than traditional DiD models. We propose a linear-in-parameters regression model that incorporates group-by-time-specific treatment effects, two-way fixed effects, and interaction terms between treatment and covariates. This functional form allows for the estimation of heterogeneous treatment effects while maintaining model flexibility. Our estimator offers consistent estimates of treatment effects under general conditions, accommodating the staggered timing of treatment and allowing for heterogeneity across various dimensions. The model is estimated using ordinary least squares (OLS) and includes covariates to control for time-varying confounders. Additionally, the two-way fixed effects capture unobserved time-invariant heterogeneity.

Keywords: Difference-in-differences; staggered treatment; heterogeneity. (search for similar items in EconPapers)
JEL-codes: C01 C21 C50 (search for similar items in EconPapers)
Date: 2025
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