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Dif-in-dif estimators of multiplicative treatment effects

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  • Fisher, Paul
  • Ciani, Emanuele

Abstract

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.

Suggested Citation

  • Fisher, Paul & Ciani, Emanuele, 2014. "Dif-in-dif estimators of multiplicative treatment effects," ISER Working Paper Series 2014-14, Institute for Social and Economic Research.
  • Handle: RePEc:ese:iserwp:2014-14
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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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