Two-way fixed-effect modelsDifference in difference课件.ppt

Yit = β0 + β1 INCit + β2 INCit-1 + β1 TAXit + β2 TAXit-1 + ui + vt + εit i is state, t is year Yit is per capita alcohol consumption INC is per capita income TAX is tax paid per gallon of alcohol 精品文档 精品文档 精品文档 Some Keys Model requires that untreated groups provide estimate of baseline trend would have been in the absence of intervention Key – find adequate comparisons If trends are not aligned, cov(TitAit,εit) ≠0 Omitted variables bias How do you know you have adequate comparison sample? 精品文档 Do the pre-treatment samples look similar Tricky. D-in-D model does not require means match