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Two-way fixed effects estimators with heterogeneous treatment effects

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  • Cl'ement de Chaisemartin
  • Xavier D'Haultf{oe}uille

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.

Suggested Citation

  • Cl'ement de Chaisemartin & Xavier D'Haultf{oe}uille, 2018. "Two-way fixed effects estimators with heterogeneous treatment effects," Papers 1803.08807, arXiv.org, revised Mar 2020.
  • Handle: RePEc:arx:papers:1803.08807
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    References listed on IDEAS

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    Cited by:

    1. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2019. "Buyer-Driven Upgrading in GVCs: The Sustainable Quality Program in Colombia," CEPR Discussion Papers 13935, C.E.P.R. Discussion Papers.
    2. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2018. "Quasi-Experimental Shift-Share Research Designs," Papers 1806.01221, arXiv.org, revised Dec 2019.
    3. Maurer, Stephan E., 2019. "Oil discoveries and education provision in the Postbellum South," Economics of Education Review, Elsevier, vol. 73(C).
    4. Rösner, Anja & Haucap, Justus & Heimeshoff, Ulrich, 2020. "The impact of consumer protection in the digital age: Evidence from the European Union," DICE Discussion Papers 330, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Kurt Schmidheiny & Sebastian Siegloch, 2019. "On Event Study Designs and Distributed-Lag Models: Equivalence, Generalization and Practical Implications," CESifo Working Paper Series 7481, CESifo Group Munich.
    6. Dmitry Arkhangelsky & Guido Imbens, 2018. "The Role of the Propensity Score in Fixed Effect Models," NBER Working Papers 24814, National Bureau of Economic Research, Inc.
    7. Giorgetti, Isabella & Picchio, Matteo, 2018. "One Billion Euro Program for Early Childcare Services in Italy," IZA Discussion Papers 11689, Institute of Labor Economics (IZA).
    8. Batut, Cyprien & Maurin, Eric, 2019. "From Ultima Ratio to Mutual Consent: The Effects of Changing Employment Protection Doctrine," IZA Discussion Papers 12440, Institute of Labor Economics (IZA).
    9. Isaiah Andrews & Matthew Gentzkow & Jesse M. Shapiro, 2020. "Transparency in Structural Research," NBER Working Papers 26631, National Bureau of Economic Research, Inc.
    10. Athey, Susan & Imbens, Guido W., 2018. "Design-based Analysis in Difference-In-Differences Settings with Staggered Adoption," Research Papers 3712, Stanford University, Graduate School of Business.
    11. Juliano Assuncao & Robert McMillan & Joshua Murphy & Eduardo Souza-Rodrigues, 2019. "Optimal Environmental Targeting in the Amazon Rainforest," Working Papers tecipa-631, University of Toronto, Department of Economics.
    12. Gautam Gowrisankaran & Keith A. Joiner & Jianjing Lin, 2019. "How do Hospitals Respond to Payment Incentives?," NBER Working Papers 26455, National Bureau of Economic Research, Inc.
    13. Thomas Dee & Emily Penner, 2019. "My Brother’s Keeper? The Impact of Targeted Educational Supports," NBER Working Papers 26386, National Bureau of Economic Research, Inc.

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