What Do We Get from Two-Way Fixed Effects Regressions? Implications from Numerical Equivalence
Fuente:
arXiv
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Preprint |
| Veröffentlicht: |
2021
|
| Schlagworte: | |
| Online-Zugang: | |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| _version_ | 1866915881656778752 |
|---|---|
| author | Ishimaru, Shoya |
| author_facet | Ishimaru, Shoya |
| contents | This paper develops numerical and causal interpretations of two-way fixed effects (TWFE) regressions in settings with nonbinary, nonstaggered treatments and time-varying covariates. Using the equivalence between TWFE and pooled first-difference regressions, I express the TWFE coefficient as a weighted average of first-difference coefficients across all horizons, clarifying how short- and long-run changes contribute to the estimate. Causal interpretation relies on common-trends assumptions across all horizons and conditioning on covariate changes rather than levels. I propose diagnostic procedures to assess these assumptions across horizons and illustrate them by reexamining TWFE estimates of minimum-wage effects on employment. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2103_12374 |
| institution | arXiv |
| publishDate | 2021 |
| record_format | arxiv |
| spellingShingle | What Do We Get from Two-Way Fixed Effects Regressions? Implications from Numerical Equivalence Ishimaru, Shoya Econometrics This paper develops numerical and causal interpretations of two-way fixed effects (TWFE) regressions in settings with nonbinary, nonstaggered treatments and time-varying covariates. Using the equivalence between TWFE and pooled first-difference regressions, I express the TWFE coefficient as a weighted average of first-difference coefficients across all horizons, clarifying how short- and long-run changes contribute to the estimate. Causal interpretation relies on common-trends assumptions across all horizons and conditioning on covariate changes rather than levels. I propose diagnostic procedures to assess these assumptions across horizons and illustrate them by reexamining TWFE estimates of minimum-wage effects on employment. |
| title | What Do We Get from Two-Way Fixed Effects Regressions? Implications from Numerical Equivalence |
| topic | Econometrics |
| url | https://arxiv.org/abs/2103.12374 |