(Empirical) Bayes Approaches to Parallel Trends
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arXiv
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| Format: | Preprint |
| Published: |
2024
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| _version_ | 1866909173812297728 |
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| author | Kwon, Soonwoo Roth, Jonathan |
| author_facet | Kwon, Soonwoo Roth, Jonathan |
| contents | We consider Bayes and Empirical Bayes (EB) approaches for dealing with violations of parallel trends. In the Bayes approach, the researcher specifies a prior over both the pre-treatment violations of parallel trends $δ_{pre}$ and the post-treatment violations $δ_{post}$. The researcher then updates their posterior about the post-treatment bias $δ_{post}$ given an estimate of the pre-trends $δ_{pre}$. This allows them to form posterior means and credible sets for the treatment effect of interest, $τ_{post}$. In the EB approach, the prior on the violations of parallel trends is learned from the pre-treatment observations. We illustrate these approaches in two empirical applications. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2404_11839 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | (Empirical) Bayes Approaches to Parallel Trends Kwon, Soonwoo Roth, Jonathan Econometrics Methodology We consider Bayes and Empirical Bayes (EB) approaches for dealing with violations of parallel trends. In the Bayes approach, the researcher specifies a prior over both the pre-treatment violations of parallel trends $δ_{pre}$ and the post-treatment violations $δ_{post}$. The researcher then updates their posterior about the post-treatment bias $δ_{post}$ given an estimate of the pre-trends $δ_{pre}$. This allows them to form posterior means and credible sets for the treatment effect of interest, $τ_{post}$. In the EB approach, the prior on the violations of parallel trends is learned from the pre-treatment observations. We illustrate these approaches in two empirical applications. |
| title | (Empirical) Bayes Approaches to Parallel Trends |
| topic | Econometrics Methodology |
| url | https://arxiv.org/abs/2404.11839 |