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Bacon decomposition for understanding differences-in-differences with variation in treatment timing

Author

Listed:
  • Austin Nichols

    (Abt Associates)

  • Andrew Goodman-Bacon

    (Vanderbilt University)

  • Thomas Goldring

    (Georgia Policy Labs)

Abstract

In applications of a difference-in-differences (DD) model, researchers often exploit natural experiments with variation in onset, comparing outcomes across groups of units that receive treatment starting at different times. Goodman-Bacon (2019) shows that this DD estimator is a weighted average of all possible two-group/two-period DD estimators in the data. The -bacon- command performs this decomposition and graphs all two-by-two DD estimates against their weight, which displays all identifying variation for the overall DD estimate. Given the widespread use of the two-way fixed effects DD model, -bacon- has broad applicability across domains and will help researchers understand how much of a given DD estimate comes from different sources of variation.

Suggested Citation

  • Austin Nichols & Andrew Goodman-Bacon & Thomas Goldring, 2019. "Bacon decomposition for understanding differences-in-differences with variation in treatment timing," 2019 Stata Conference 46, Stata Users Group.
    • Handle: RePEc:boc:scon19:46
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    File URL: http://fmwww.bc.edu/repec/scon2019/chicago19_Goodman-Bacon.pptx
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    Cited by:

    1. Bongiovanni, Alessio & Reghezza, Alessio & Santamaria, Riccardo & Williams, Jonathan, 2021. "Do negative interest rates affect bank risk-taking?," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 350-364.

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