Pre-Event Trends in the Panel Event-Study Design

We consider a linear panel event-study design in which unobserved confounds may be related both to the outcome and to the policy variable of interest. We provide sufficient conditions to identify the causal effect of the policy by exploiting covariates related to the policy only through the confounds. Our model implies a set of moment equations that are linear in parameters. The effect of the policy can be estimated by 2SLS, and causal inference is valid even when endogeneity leads to pre-event trends ("pre-trends") in the outcome. Alternative approaches perform poorly in our simulations

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Year of publication:	2018
Authors:	Freyaldenhoven, Simon
Other Persons:	Hansen, Christian Bailey (contributor) ; Shapiro, Jesse M. (contributor)
Publisher:	[2018]: [S.l.] : SSRN
Subject:	Panel \| Panel study \| Schätztheorie \| Estimation theory \| Regressionsanalyse \| Regression analysis \| Diskrete Verteilung \| Discrete distribution \| Kausalanalyse \| Causality analysis