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  • Journal of Financial Economics

How Much Should We Trust Staggered Difference-In-Differences Estimates?

By: Andrew C. Baker, David F. Larcker and Charles C.Y. Wang
  • Format:Print
  • | Pages:26
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Abstract

We explain when and how staggered difference-in-differences regression estimators, commonly applied to assess the impact of policy changes, are biased. These biases are likely to be relevant for a large portion of research settings in finance, accounting, and law that rely on staggered treatment timing, and can result in Type-I and Type-II errors. We summarize three alternative estimators developed in the econometrics and applied literature for addressing these biases, including their differences and tradeoffs. We apply these estimators to re-examine prior published results and show, in many cases, the alternative causal estimates or inferences differ substantially from prior papers.

Keywords

Difference In Differences; Staggered Difference-in-differences Designs; Generalized Difference-in-differences; Dynamic Treatment Effects; Mathematical Methods

Citation

Baker, Andrew C., David F. Larcker, and Charles C.Y. Wang. "How Much Should We Trust Staggered Difference-In-Differences Estimates?" Journal of Financial Economics 144, no. 2 (May 2022): 370–395. (Editor's Choice, May 2022; Jensen Prize, First Place, June 2023.)

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About The Author

Charles C.Y. Wang

Accounting and Management
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