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A note on difference-in-difference estimation by Fixed Effects and OLS when there is panel non-response

Listed author(s):
  • Fernández Kranz, Daniel

    ()

  • Lechner, Michael

    ()

  • Rodriguez-Planas, Nuria

    ()

In this note, we show that the OLS and fixed-effects (FE) estimators of the popular differ-ence-in-differences model may deviate when there is time varying panel non-response. If such non-response does not affect the common-trend assumption, then OLS and FE are consistent, but OLS is more precise. However, if non-response is affecting the common-trend assumption, then FE estimation may still be consistent, while OLS will be inconsistent. We provide simulation as well as empirical evidence for this phenomenon to occur. We conclude that in case of unbalanced panels, any evidence of deviating OLS and FE estimates should be considered as evidence that non-response is not ignorable for the differences-in-differences estimation.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1507.pdf
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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1507.

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Length: 16 pages
Date of creation: Mar 2015
Handle: RePEc:usg:econwp:2015:07
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  1. Fernández-Kranz, Daniel & Rodríguez-Planas, Núria, 2013. "Can Parents' Right to Work Part-Time Hurt Childbearing-Aged Women? A Natural Experiment with Administrative Data," IZA Discussion Papers 7509, Institute for the Study of Labor (IZA).
  2. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
  3. Amuedo-Dorantes, Catalina & Serrano-Padial, Ricardo, 2007. "Wage Growth Implications of Fixed-Term Employment: An Analysis by Contract Duration and Job Mobility," Labour Economics, Elsevier, vol. 14(5), pages 829-847, October.
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