IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2310.15796.html
   My bibliography  Save this paper

Testing for equivalence of pre-trends in Difference-in-Differences estimation

Author

Listed:
  • Holger Dette

    (Ruhr University Bochum)

  • Martin Schumann

    (Maastricht University)

Abstract

The plausibility of the ``parallel trends assumption'' in Difference-in-Differences estimation is usually assessed by a test of the null hypothesis that the difference between the average outcomes of both groups is constant over time before the treatment. However, failure to reject the null hypothesis does not imply the absence of differences in time trends between both groups. We provide equivalence tests that allow researchers to find evidence in favor of the parallel trends assumption and thus increase the credibility of their treatment effect estimates. While we motivate our tests in the standard two-way fixed effects model, we discuss simple extensions to settings in which treatment adoption is staggered over time.

Suggested Citation

  • Holger Dette & Martin Schumann, 2023. "Testing for equivalence of pre-trends in Difference-in-Differences estimation," Papers 2310.15796, arXiv.org.
    • Handle: RePEc:arx:papers:2310.15796
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2310.15796
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joseph P. Romano & Azeem M. Shaikh & Michael Wolf, 2014. "A Practical Two‐Step Method for Testing Moment Inequalities," Econometrica, Econometric Society, vol. 82, pages 1979-2002, September.
    2. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    3. Badi H. Baltagi, 2021. "The Two-Way Error Component Regression Model," Springer Texts in Business and Economics, in: Econometric Analysis of Panel Data, edition 6, chapter 0, pages 47-74, Springer.
    4. Erin Hartman & F. Daniel Hidalgo, 2018. "An Equivalence Approach to Balance and Placebo Tests," American Journal of Political Science, John Wiley & Sons, vol. 62(4), pages 1000-1013, October.
    5. Rafael Di Tella & Ernesto Schargrodsky, 2004. "Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack," American Economic Review, American Economic Association, vol. 94(1), pages 115-133, March.
    6. Holger Dette & Kevin Kokot & Stanislav Volgushev, 2020. "Testing relevant hypotheses in functional time series via self‐normalization," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 82(3), pages 629-660, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carrillo, Paul E. & Lopez-Luzuriaga, Andrea & Malik, Arun S., 2018. "Pollution or crime: The effect of driving restrictions on criminal activity," Journal of Public Economics, Elsevier, vol. 164(C), pages 50-69.
    2. Acosta, Camilo & Mejía, Daniel & Zorro Medina, Angela, 2023. "On the Tension Between Due Process Protection and Public Safety: The Case of an Extensive Procedural Reform in Colombia," Documentos CEDE 20924, Universidad de los Andes, Facultad de Economía, CEDE.
    3. Nils Braakmann, 2022. "Does stop and search reduce crime? Evidence from street‐level data and a surge in operations following a high‐profile crime," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 185(3), pages 1370-1397, July.
    4. Miao Wang & Hong Zhuang, 2021. "FDI and educational outcomes in developing countries," Empirical Economics, Springer, vol. 61(6), pages 3505-3539, December.
    5. Altindag, Duha T. & Mocan, Naci & Zhang, Jie, 2021. "Freedom of Speech, Deterrence, and Compellence in the Parliament," IZA Discussion Papers 14308, Institute of Labor Economics (IZA).
    6. Victor Chernozhukov & Denis Chetverikov & Kengo Kato, 2013. "Testing Many Moment Inequalities," CeMMAP working papers 65/13, Institute for Fiscal Studies.
    7. Miao Wang & Hong Zhuang, 2022. "Effect of official development assistance on adolescent fertility rate: within-country evidence," Economics Bulletin, AccessEcon, vol. 42(2), pages 566-590.
    8. Schwartz, Joseph A. & Allen, Samantha L., 2024. "The accumulated impact of direct and indirect workplace violence exposure on mental health and physiological activity among correctional officers," Journal of Criminal Justice, Elsevier, vol. 93(C).
    9. Luis Aguiar & Jörg Claussen & Christian Peukert, 2018. "Catch Me If You Can: Effectiveness and Consequences of Online Copyright Enforcement," Information Systems Research, INFORMS, vol. 29(3), pages 656-678, September.
    10. Jongmoo Jay Choi & Hoje Jo & Jimi Kim & Moo Sung Kim, 2018. "Business Groups and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 153(4), pages 931-954, December.
    11. Clément de Chaisemartin & Jaime Ramirez-Cuellar, 2024. "At What Level Should One Cluster Standard Errors in Paired and Small-Strata Experiments?," American Economic Journal: Applied Economics, American Economic Association, vol. 16(1), pages 193-212, January.
    12. Francesca Carta & Lucia Rizzica, 2015. "Female employment and pre-kindergarten: on the uninteded effects of an Italian reform," Temi di discussione (Economic working papers) 1030, Bank of Italy, Economic Research and International Relations Area.
    13. Rotunno, Lorenzo, 2016. "Political stability and trade agreements: Evidence for ‘endgame FTAs’," European Journal of Political Economy, Elsevier, vol. 45(C), pages 133-148.
    14. Yuheng Lin & Dooruj Rambaccussing & Yu Zhu, 2024. "The impact of international students in the UK on the cultural goods trade," French Stata Users' Group Meetings 2024 29, Stata Users Group.
    15. Friedrich, Sarah & Pauly, Markus, 2018. "MATS: Inference for potentially singular and heteroscedastic MANOVA," Journal of Multivariate Analysis, Elsevier, vol. 165(C), pages 166-179.
    16. Nora Gordon & Sarah Reber, 2018. "The effects of school desegregation on mixed-race births," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(2), pages 561-596, April.
    17. Borisova, Ekaterina & Gründler, Klaus & Hackenberger, Armin & Harter, Anina & Potrafke, Niklas & Schoors, Koen, 2023. "Crisis experience and the deep roots of COVID-19 vaccination preferences," European Economic Review, Elsevier, vol. 160(C).
    18. Tom Kirchmaier & Stephen Machin & Matteo Sandi & Robert Witt, 2020. "Prices, Policing and Policy: The Dynamics of Crime Booms and Busts," Journal of the European Economic Association, European Economic Association, vol. 18(2), pages 1040-1077.
    19. Disha Gupta, 2023. "Free power, irrigation, and groundwater depletion: Impact of farm electricity policy of Punjab, India," Agricultural Economics, International Association of Agricultural Economists, vol. 54(4), pages 515-541, July.
    20. Berthélemy Michel & Bonev Petyo & Dussaux Damien & Söderberg Magnus, 2019. "Methods for strengthening a weak instrument in the case of a persistent treatment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 23(1), pages 1-30, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2310.15796. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.