Journal of Financial Economics · 2022 · 2.9K citations · 17 references
Public HealthEconomicsFinanceCausal InferenceEconometricsFinancial EconometricsCausal Effect EstimationFixed-effect ModelsPolicy Impact AnalysisSelection BiasTreatment EffectsAccounting Policy ChangesBias ReductionDifference-in-differencesTreatment Effect EstimationTreatment Effects EstimationType Ii Error
We explain when and how staggered difference-in-differences regression estimators, commonly applied to assess the impact of policy changes, are biased. These biases are likely to be relevant for a large portion of research settings in finance, accounting, and law that rely on staggered treatment timing, and can result in Type-I and Type-II errors. We summarize three alternative estimators developed in the econometrics and applied literature for addressing these biases, including their differences and tradeoffs. We apply these estimators to re-examine prior published results and show, in many cases, the alternative causal estimates or inferences differ substantially from prior papers.
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