Identification and Inference in Nonlinear Difference-In-Differences Models / Susan Athey, Guido W. Imbens.

Format:

Book

Author/Creator:

Athey, Susan.

Contributor:

National Bureau of Economic Research.

Imbens, Guido W.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0280.

NBER technical working paper series no. t0280

Language:

English

Subjects (All):

Econometric models.

Financial crises.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Cambridge, Mass. : National Bureau of Economic Research, 2002.

Summary:

This paper develops an alternative approach to the widely used Difference-In-Difference (DID) method for evaluating the effects of policy changes. In contrast to the standard approach, we introduce a nonlinear model that permits changes over time in the effect of unobservables (e.g., there may be a time trend in the level of wages as well as the returns to skill in the labor market). Further, our assumptions are independent of the scaling of the outcome. Our approach provides an estimate of the entire counterfactual distribution of outcomes that would have been experienced by the treatment group in the absence of the treatment, and likewise for the untreated group in the presence of the treatment. Thus, it enables the evaluation of policy interventions according to criteria such as a mean-variance tradeoff. We provide conditions under which the model is nonparametrically identified and propose an estimator. We consider extensions to allow for covariates and discrete dependent variables. We also analyze inference, showing that our estimator is root-N consistent and asymptotically normal. Finally, we consider an application.

Notes:

Print version record

September 2002.