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A Local Projections Approach to Difference‐in‐Differences

Author

Listed:
  • Arindrajit Dube
  • Daniele Girardi
  • Òscar Jordà
  • Alan M. Taylor

Abstract

We propose a local projections (LPs)‐based difference‐in‐differences (DiD) approach that subsumes many of the recent solutions proposed in the literature to address possible biases arising from negative weighting. We combine LPs with a flexible “clean control” condition to define appropriate sets of treated and control units. Our proposed LP‐DiD estimator can be implemented with various weighting and normalization schemes for different target estimands, can be extended to include covariates or accommodate nonabsorbing treatment, and is simple and fast to implement. A simulation and two empirical applications demonstrate that the LP‐DiD estimator performs well in common applied settings.

Suggested Citation

  • Arindrajit Dube & Daniele Girardi & Òscar Jordà & Alan M. Taylor, 2025. "A Local Projections Approach to Difference‐in‐Differences," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(7), pages 741-758, November.
    • Handle: RePEc:wly:japmet:v:40:y:2025:i:7:p:741-758
    DOI: 10.1002/jae.70000
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    1. Yu, Yantuan & Zhang, Ning, 2025. "Towards low-carbon development through integration of technology and finance: Quasi-experimental evidence from China," Research in International Business and Finance, Elsevier, vol. 80(C).
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    3. Mayoral, L. & Mueller, H. & Philipp, M. & Rauh, C. & Vassallo, R., 2026. "Semantic Similarity Measures in Newspaper Text for Detecting and Predicting Disruptive Institutional Events," Cambridge Working Papers in Economics 2609, Faculty of Economics, University of Cambridge.
    4. Kwon, Ohyun & Nagengast, Arne J. & Yoon, Jangsu & Yotov, Yoto, 2026. "From imposition to lifting: Estimating the effects of sanctions over their lifecycle," Discussion Papers 06/2026, Deutsche Bundesbank.
    5. Florian Dorn & Marie-Theres Gasser & Kevin Kloiber & Simon Krause & Carla Krolage, 2026. "Who Scores from Hosting Sports Events? Local Spending Effects of the EURO 2024," CESifo Working Paper Series 12555, CESifo.
    6. Raj Chetty & Rebecca Diamond & Thomas B. Foster & Lawrence F. Katz & Sonya Porter & Matthew Staiger & Laura Tach, 2026. "Creating High-Opportunity Neighborhoods: Evidence from the HOPE VI Program," NBER Working Papers 34720, National Bureau of Economic Research, Inc.
    7. Lara Coulier & Selien De Schryder & Milan van den Heuvel & Tobias Verlaeckt, 2026. "Pushing the Limit: How Borrowers Tackle an LTV Cap," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 26/1138, Ghent University, Faculty of Economics and Business Administration.
    8. Kai Sun & Xin Zhong & Ding Xiong, 2026. "The Impact of Cross‐Border E‐Commerce on Urban Entrepreneurial Activity: Evidence From Cross‐Border E‐Commerce Comprehensive Pilot Zones," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 47(3), pages 670-687, April.

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