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When Should Pre-trends Be Parallel?

Author

Listed:
  • Dalia Ghanem
  • Pedro H. C. Sant’Anna
  • Kaspar Wüthrich

Abstract

We analyze pre-trends tests through the lens of how units select into treatment. We derive necessary and sufficient conditions for pre-trends and trends to be parallel with and without covariates. These conditions show that even in the absence of structural breaks, pre-trends tests can be uninformative about parallel trends, except under specific restrictions on selection. Thus, correctly interpreting pre-trends tests requires an understanding of the units’ selection behavior, and pre-trends tests cannot replace economic arguments for parallel trends. We document additional issues with pre-trends tests when researchers control for pre-treatment values of time-varying covariates.

Suggested Citation

  • Dalia Ghanem & Pedro H. C. Sant’Anna & Kaspar Wüthrich, 2026. "When Should Pre-trends Be Parallel?," AEA Papers and Proceedings, American Economic Association, vol. 116, pages 64-69, May.
    • Handle: RePEc:aea:apandp:v:116:y:2026:p:64-69
    DOI: 10.1257/pandp.20261109
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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