The PCDID Approach: Difference-in-Differences When Trends Are Potentially Unparallel and Stochastic

Marc Chan and Simon Sai Man Kwok

Journal of Business & Economic Statistics, 2022, vol. 40, issue 3, 1216-1233

Abstract: We develop a class of regression-based estimators, called Principal Components Difference-in-Differences (PCDID) estimators, for treatment effect estimation. Analogous to a control function approach, PCDID uses factor proxies constructed from control units to control for unobserved trends, assuming that the unobservables follow an interactive effects structure. We clarify the conditions under which the estimands in this regression-based approach represent useful causal parameters of interest. We establish consistency and asymptotic normality results of PCDID estimators under minimal assumptions on the specification of time trends. The PCDID approach is illustrated in an empirical exercise that examines the effects of welfare waiver programs on welfare caseloads in the United States.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1080/07350015.2021.1914636 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The PCDID Approach: Difference-in-Differences when Trends are Potentially Unparallel and Stochastic (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jnlbes:v:40:y:2022:i:3:p:1216-1233

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/UBES20

DOI: 10.1080/07350015.2021.1914636

Access Statistics for this article

Journal of Business & Economic Statistics is currently edited by Eric Sampson, Rong Chen and Shakeeb Khan

More articles in Journal of Business & Economic Statistics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().