Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects
Clément de Chaisemartin, Xavier D'Haultfœuille
American Economic Review · 2020 · Volume 110 · Issue 9
Abstract
Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator.
Keywords
Single Equation Models, Single Variables: Cross-Sectional Models, Spatial Models, Treatment Effect Models, Quantile Regressions, Single Variables: Panel Data Models, Spatio-temporal Models, Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior, Wage Level and Structure, Wage Differentials, Trade Unions: Objectives, Structure, and Effects, Entertainment, Media
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