Inference with Difference-in-Differences Revisited

Brewer, Mike and Crossley, Thomas and Joyce, Robert (2013) Inference with Difference-in-Differences Revisited. In: 8th IZA Conference on Labor Market Policy Evaluation co-hosted by the IFS and PEPA., 18 and 19 October 2013, London.

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Abstract

A growing literature on inference in difference-in-differences (DiD) designs with grouped errors has been pessimistic about obtaining hypothesis tests of the correctsize, particularly with few groups. We provide Monte Carlo evidence for three points: (i) it is possible to obtain tests of the correct size even with few groups, and in many settings very straightforward methods will achieve this; (ii) the main problem in DiD designs with grouped errors is instead low power to detect real effects; and (iii) feasible GLS estimation combined with robust inference can increase power considerably whilst maintaining correct test size – again, even with few groups

Item Type:Conference or Workshop Item (Paper)
Uncontrolled Keywords:difference in diferences, hypothesis test, power, cluster robust, feasible GLS
Subjects:1. Frameworks for Research and Research Designs > 1.11 Evaluation Research
ID Code:3211
Deposited By: PEPA User
Deposited On:20 Nov 2013 10:24
Last Modified:20 Nov 2013 10:24

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