Panel treatment effects measurement: Factor or linear projection modelling?

Cheng Hsiao and Qiankun Zhou

Journal of Applied Econometrics, 2024, vol. 39, issue 7, 1332-1358

Abstract: We discuss methods of measuring the treatment effects of a unit through the use of other units in panel data by either the factor‐based (FB) approach or the linear projection (LP) approach under different sample configurations of cross‐sectional dimension N and time series dimension T. We show that the LP approach in general yields smaller mean square prediction error than the FB approach when either both N and T are large or N fixed and T→∞ or T fixed and N large. The Monte Carlo simulation and empirical example are also conducted to consider their finite sample performances.

Date: 2024
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https://doi.org/10.1002/jae.3081

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Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:39:y:2024:i:7:p:1332-1358

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