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Finitely Heterogeneous Treatment Effect in Event-study

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  • Myungkou Shin

Abstract

The key assumption of the differences-in-differences approach in the event-study design is that untreated potential outcome differences are mean independent of treatment timing: the parallel trend assumption. In this paper, we relax the parallel trend assumption by assuming a latent type variable and developing a type-specific parallel trend assumption. With a finite support assumption on the latent type variable, we show that an extremum classifier consistently estimates the type assignment. Based on the classification result, we propose a type-specific diff-in-diff estimator for type-specific CATT. By estimating the CATT with regard to the latent type, we study heterogeneity in treatment effect, in addition to heterogeneity in baseline outcomes.

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  • Myungkou Shin, 2022. "Finitely Heterogeneous Treatment Effect in Event-study," Papers 2204.02346, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2204.02346
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