Arbeitspapier
Time-Weighted Difference-in-Differences: Accounting for Common Factors in Short T Panels
This paper proposes a time-weighted difference-in-differences (TWDID) estimation approach that is robust against interactive fixed effects in short T panels. Time weighting substantially reduces both bias and variance compared to conventional DID estimation through balancing the pre-treatment and post-treatment unobserved common factors. To conduct valid inference on the average treatment effect, I develop a correction term that adjusts conventional standard errors for weight estimation uncertainty. Revisiting a study on the effect of a cap-and-trade program on NOx emissions, TWDID estimation reduces the standard errors of the estimated treatment effect by 10% compared to a conventional DID approach. In a second application I illustrate how to implement TWDID in settings with staggered adoption of the treatment.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. TI 2023-004/III
- Classification
-
Wirtschaft
- Subject
-
synthetic difference-in-differences
dynamic treatment effects
interactive fixed effects
panel data
- Event
-
Geistige Schöpfung
- (who)
-
Schenk, Timo
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2023
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Schenk, Timo
- Tinbergen Institute
Time of origin
- 2023
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