Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89904 
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Papers No. 7742
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
A growing literature on inference in difference-in-differences (DiD) designs with grouped errors has been pessimistic about obtaining hypothesis tests of the correct size, particularly with few groups. We provide Monte Carlo evidence for three points: (i) it is possible to obtain tests of the correct size even with few groups, and in many settings very straightforward methods will achieve this; (ii) the main problem in DiD designs with grouped errors is instead low power to detect real effects; and (iii) feasible GLS estimation combined with robust inference can increase power considerably whilst maintaining correct test size – again, even with few groups.
Subjects: 
difference in differences
hypothesis test
power
cluster robust
feasible GLS
JEL: 
C12
C13
C21
Document Type: 
Working Paper

Files in This Item:
File
Size
404.73 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.