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Dif-in-dif estimators of multiplicative treatment effects

  • Fisher, Paul
  • Ciani, Emanuele

We consider a difference-in-differences setting with a continuous outcome, such as wages or expenditure. The standard practice is to take its logarithm and then interpret the results as an approximation of the multiplicative treat- ment effect on the original outcome. We argue that a researcher should rather focus on the non-transformed outcome when discussing causal inference. Fur- thermore, it is preferable to use a non-linear estimator, because running OLS on the log-linearised model might confound distributional and mean changes. We illustrate the argument with an original empirical analysis of the impact of the UK Educational Maintenance Allowance on households’ expenditure, and with a simulation exercise.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2014-14.

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Date of creation: 13 Mar 2014
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Publication status: published
Handle: RePEc:ese:iserwp:2014-14
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