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

Author

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  • Fernández Kranz, Daniel
  • Lechner, Michael
  • Rodriguez-Planas, Nuria

Abstract

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.

Suggested Citation

  • Fernández Kranz, Daniel & Lechner, Michael & Rodriguez-Planas, Nuria, 2015. "A note on difference-in-difference estimation by Fixed Effects and OLS when there is panel non-response," Economics Working Paper Series 1507, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2015:07
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1507.pdf
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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 of Labor Economics (IZA).
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    Cited by:

    1. Fotios Pasiouras, 2018. "Financial Consumer Protection and the Cost of Financial Intermediation: Evidence from Advanced and Developing Economies," Management Science, INFORMS, vol. 64(2), pages 902-924, February.

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    More about this item

    Keywords

    Difference-in-difference estimation; attrition; panel estimation; balanced panel; unbalanced panel;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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