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Simple Diagnostics for Two-Way Fixed Effects

Pamela Jakiela

No 2021-05, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Difference-in-differences estimation is a widely used method of program evaluation. When treatment is implemented in different places at different times, researchers often use two-way fixed effects to control for location-specific and period-specific shocks. Such estimates can be severely biased when treatment effects change over time within treated units. I review the sources of this bias and propose several simple diagnostics for assessing its likely severity. I illustrate these tools through a case study of free primary education in Sub-Saharan Africa.

Keywords: difference-in-differences; program evaluation; heterogeneous treatment effects; World Development Indicators; free primary education (search for similar items in EconPapers)
JEL-codes: C21 O15 (search for similar items in EconPapers)
Pages: 23
Date: 2021-03-26
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