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Estimating Difference-in-Differences in the Presence of Spillovers

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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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    3. Paul Aseete & Andrew Barkley & Enid Katungi & Michael Adrogu Ugen & Eliud Birachi, 2023. "Public–private partnership generates economic benefits to smallholder bean growers in Uganda," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 15(1), pages 201-218, February.
    4. Andrea Cinque & Lennart Reiners, 2022. "Confined to Stay: Natural Disasters and Indonesia's Migration Ban," CESifo Working Paper Series 9837, CESifo.
    5. Zhao, Renjie & Zhang, Jiakai, 2022. "Rent-tax substitution and its impact on firms: Evidence from housing purchase limits policy in China," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    6. Tongyue Zhang & Mengyang Hou & Liqi Chu & Lili Wang, 2022. "Can the Establishment of National Key Ecological Function Areas Enhance Vegetation Carbon Sink? A Quasi-Natural Experiment Evidence from China," IJERPH, MDPI, vol. 19(19), pages 1-21, September.
    7. 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.
    8. Kyle Butts, 2021. "Difference-in-Differences with Geocoded Microdata," Papers 2110.10192, arXiv.org.
    9. Li, Wen & Peng, Qing, 2023. "Digital courts and corporate investment in sustainability: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 88(C).
    10. Kyle Butts, 2021. "Difference-in-Differences Estimation with Spatial Spillovers," Papers 2105.03737, arXiv.org, revised Jun 2023.
    11. Greenaway-McGrevy, Ryan & Phillips, Peter C.B., 2023. "The impact of upzoning on housing construction in Auckland," Journal of Urban Economics, Elsevier, vol. 136(C).
    12. Mitze, Timo & Breidenbach, Philipp, 2023. "The complex regional effects of macro-institutional shocks: Evidence from EU economic integration over three decades," Ruhr Economic Papers 1007, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. Garz, Marcel & Schneider, Andrea, 2023. "Data sharing and tax enforcement: Evidence from short-term rentals in Denmark," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    14. Butts, Kyle, 2023. "JUE Insight: Difference-in-differences with geocoded microdata," Journal of Urban Economics, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    Policy evaluation; difference-in-differences; spillovers; natural experiments; SUTVA;
    All these keywords.

    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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