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Difference in Differences for Stayers and Movers with a Time-Varying QualiÂ…cation

M. Lee and Y. Kim
Authors registered in the RePEc Author Service: Xin Mo Lee and Myoung-jae Lee

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: When a treatment in difference in differences (DD) is applied to a group of individuals with a time-constant qualifi…cation/eligibility such as gender or race, there is no issue of choosing to be (un-)treated. But if the quali…fication is time-varying, then the individuals may alter their qualifi…cations to get (un-)treated. In this case, the conventional DD ignoring quali…fication changes is invalid in general, and it is interesting to know whether the newly qualifi…ed (the “in-movers”) will experience the same treatment effect as those already qualifi…ed (the “in-stayers”). In this paper, we explore identifying treatment effects with DD when the quali…fication is time-varying, and propose ‘the effect on the in-stayers’ as the main effect of interest. The identi…fication is implemented with a simple nonparametric estimator or with least squares estimator for panel linear models. An empirical analysis is provided using Korean data for the effects of the Basic Elder Pension on health-care expenditure, which shows that the conventional DD ignoring quali…fication changes is misleading by mixing the effect on the in-stayers with the effect on the in-movers.

Keywords: difference in differences; effect on in-stayers; effect on in-movers; untreated moving effect; panel data (search for similar items in EconPapers)
JEL-codes: C14 C21 C3 I11 (search for similar items in EconPapers)
Date: 2013-08
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