Identification and Estimation of Intensive Margin Effects by Difference-in-Difference Methods

Abstract This paper discusses identification and estimation of causal intensive margin effects. The causal intensive margin effect is defined as the treatment effect on the outcome of individuals with a positive outcome irrespective of whether they are treated or not, and is of interest for outcomes with corner solutions. The main issue is to deal with a potential selection problem that arises when conditioning on positive outcomes. We propose using difference-in-difference methods - conditional on positive outcomes - to estimate causal intensive margin effects. We derive sufficient conditions under which the difference-in-difference estimator identifies the causal intensive margin effect. We apply the methodology to estimate the causal intensive margin effect of reaching the full retirement age on working hours.