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Difference-in-differences with "bad controls"

Author

Listed:
  • Carolina Caetano
  • Brantly Callaway
  • Stroud Payne
  • Hugo Sant'Anna

Abstract

This paper considers difference-in-differences identification strategies when the parallel trends assumption holds after conditioning on covariates that may themselves be affected by the treatment (often referred to as "bad controls"). We show that common approaches such as simply dropping bad controls are often ill-advised and develop two alternative approaches that allow bad controls to function as genuine controls despite being affected by treatment. First, we derive explicit conditions that rationalize conditioning only on pre-treatment values of the bad control, leading naturally to the Callaway and Sant'Anna (2021) estimator with pre-treatment values as covariates. Second, under a covariate unconfoundedness condition, we develop imputation and double/debiased machine learning estimators that recover the average treatment effect on the treated. We extend these results to staggered treatment adoption, provide pre-tests for the identifying assumptions, and apply the methods to study the effects of job displacement on earnings.

Suggested Citation

  • Carolina Caetano & Brantly Callaway & Stroud Payne & Hugo Sant'Anna, 2026. "Difference-in-differences with "bad controls"," Papers 2608.03881, arXiv.org, revised Sep 2026.
  • Handle: RePEc:arx:papers:2608.03881
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    File URL: https://arxiv.org/pdf/2608.03881
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    References listed on IDEAS

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    1. Lechner, Michael, 2008. "A note on endogenous control variables in causal studies," Statistics & Probability Letters, Elsevier, vol. 78(2), pages 190-195, February.
    2. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 605-654.
    3. Audrey Renson & Michael G. Hudgens & Alexander P. Keil & Paul N. Zivich & Allison E. Aiello, 2023. "Identifying and estimating effects of sustained interventions under parallel trends assumptions," Biometrics, The International Biometric Society, vol. 79(4), pages 2998-3009, December.
    4. Flores, Carlos A. & Flores-Lagunes, Alfonso, 2009. "Identification and Estimation of Causal Mechanisms and Net Effects of a Treatment under Unconfoundedness," IZA Discussion Papers 4237, IZA Network @ LISER.
    5. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    6. Acharya, Avidit & Blackwell, Matthew & Sen, Maya, 2016. "Explaining Causal Findings Without Bias: Detecting and Assessing Direct Effects," American Political Science Review, Cambridge University Press, vol. 110(3), pages 512-529, August.
    7. Eva Deuchert & Martin Huber & Mark Schelker, 2019. "Direct and Indirect Effects Based on Difference-in-Differences With an Application to Political Preferences Following the Vietnam Draft Lottery," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(4), pages 710-720, October.
    8. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    9. Callaway, Brantly & Li, Tong & Oka, Tatsushi, 2018. "Quantile treatment effects in difference in differences models under dependence restrictions and with only two time periods," Journal of Econometrics, Elsevier, vol. 206(2), pages 395-413.
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    Cited by:

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