Simple Diagnostics for Two-Way Fixed Effects

Pamela Jakiela

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arXiv · 2103.13229

Simple Diagnostics for Two-Way Fixed Effects

Pamela Jakiela

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Abstract

Difference-in-differences estimation is a widely used method of program evaluation. When treatment is implemented in different places at different times, researchers often use two-way fixed effects to control for location-specific and period-specific shocks. Such estimates can be severely biased when treatment effects change over time within treated units. I review the sources of this bias and propose several simple diagnostics for assessing its likely severity. I illustrate these tools through a case study of free primary education in Sub-Saharan Africa.

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Pamela Jakiela. 2021-03-24. Simple Diagnostics for Two-Way Fixed Effects. https://arxiv.org/abs/2103.13229

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