Two-way fixed effects estimators with heterogeneous treatment effects
Econometrics
2023-04-18 v7
Abstract
Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator.
Keywords
Cite
@article{arxiv.1803.08807,
title = {Two-way fixed effects estimators with heterogeneous treatment effects},
author = {Clément de Chaisemartin and Xavier D'Haultfœuille},
journal= {arXiv preprint arXiv:1803.08807},
year = {2023}
}
Comments
First version: March 2018. 71 pages (main paper until page 36, then supplement)