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Estimating Difference-in-Differences in the Presence of Spillovers

Author

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  • Clarke, Damian

Abstract

I propose a method for difference-in-differences (DD) estimation in situations where the stable unit treatment value assumption is violated locally. This is relevant for a wide variety of cases where spillovers may occur between quasi-treatment and quasi-control areas in a (natural) experiment. A flexible methodology is described to test for such spillovers, and to consistently estimate treatment effects in their presence. This spillover-robust DD method results in two classes of estimands: treatment effects, and “close” to treatment effects. The methodology outlined describes a versatile and non-arbitrary procedure to determine the distance over which treatments propagate, where distance can be defined in many ways, including as a multi-dimensional measure. This methodology is illustrated by simulation, and by its application to estimates of the impact of state-level text-messaging bans on fatal vehicle accidents. Extending existing DD estimates, I document that reforms travel over roads, and have spillover effects in neighbouring non-affected counties. Text messaging laws appear to continue to alter driving behaviour as much as 30 km outside of affected jurisdictions.

Suggested Citation

  • Clarke, Damian, 2017. "Estimating Difference-in-Differences in the Presence of Spillovers," MPRA Paper 81604, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:81604
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    File URL: https://mpra.ub.uni-muenchen.de/81604/1/MPRA_paper_81604.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mitze, Timo & Breidenbach, Philipp, 2018. "Economic integration and growth at the margin: A space-time incremental impact analysis," Ruhr Economic Papers 775, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Policy evaluation; difference-in-differences; spillovers; natural experiments; SUTVA;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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