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IZA paper MB_TC_RJ.pdf
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A growing literature on inference in difference-in-differences (DiD) designs with grouped errors has been pessimistic about obtaining hypothesis tests of the correctsize, particularly with few groups. We provide Monte Carlo evidence for three points: (i) it is possible to obtain tests of the correct size even with few groups, and in many settings very straightforward methods will achieve this; (ii) the main problem in DiD designs with grouped errors is instead low power to detect real effects; and (iii) feasible GLS estimation combined with robust inference can increase power considerably whilst maintaining correct test size – again, even with few groups
Authors
Mike Brewer
Research Fellow University of Michigan
Tom is a Research Fellow at IFS, a Research Professor for the Institute for Social Research at the University of Michigan.
Deputy Director
Robert is a Deputy Director. His work focuses on primarily on the labour market, income and wealth inequality, and the design of the welfare system.
Report details
- Publisher
- IFS
Suggested citation
M, Brewer and T, Crossley and R, Joyce. (2013). Inference with Difference-in-Differences Revisited. London: IFS. Available at: https://ifs.org.uk/publications/inference-difference-differences-revisited-1 (accessed: 25 April 2024).
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