Difference-in-Differences with Multiple Events

Lin-Tung Tsai

Papers from arXiv.org

Abstract: This paper studies staggered Difference-in-Differences (DiD) design when there is a second event confounding the target event. When the events are correlated, the treatment and the control group are unevenly exposed to the effects of the second event, causing an omitted event bias. To address this bias, I propose a two-stage DiD design. In the first stage, I estimate the combined effects of both treatments using a control group that is neither treated nor confounded. In the second stage, I isolate the effects of the target treatment by leveraging a parallel treatment effect assumption and a control group that is treated but not yet confounded. Finally, I apply this method to revisit the effect of minimum wage increases on teen employment using state-level hikes between 2010 and 2020. I find that the Medicaid expansion under the ACA is a significant confounder: controlling for this bias reduces the short-term estimate of the minimum wage effect by two-thirds.

Date: 2024-09, Revised 2025-01
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2409.05184

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