Difference in Differences - Transparencies

Difference in Differences - Transparencies - Dierence in...

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Di/erence in Di/erences STP Advanced Econometrics Lecture Douglas G. Steigerwald UC Santa Barbara July 2010 D. Steigerwald (UCSB) Di/erence in Di/erences 07±10 1 ± 7
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Intuition Reference: Mostly Harmless Econometrics Chapter 5.2 Regressor of interest varies across groups Impact of new incinerator on home prices? Incinerator a/ects only nearby homes Compare: price di/erences across homes near and far, before and after incinerator D. Steigerwald (UCSB) Di/erence in Di/erences 07±10 2 ± 7
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Y ilt outcome for observation i (in group l and period t ) Y 1 ilt outcome with treatment Y 0 ilt outcome without treatment counterfactual experiment Example: l denotes neighborhood in North Andover, MA two groups, one is near incinerator t denotes period 1978 before incinerator discussed 1981 incinerator construction started D. Steigerwald (UCSB) Di/erence in Di/erences 07±10 3 ± 7
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Identifying Assumption Two groups di/er only in treatment E ( Y 0 ilt ) = γ l + λ t
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Difference in Differences - Transparencies - Dierence in...

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