American Economic Review
Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects
✓ Free legal copy found
Preprint, hosted by Cornell University (arxiv.org)
This is the authors’ own version from before peer review, so it may differ from the published paper.
Read the free PDF →Abstract
Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE ) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator. (JEL C21, C23, D72, J31, J51, L82)
DOI: 10.1257/aer.20181169 · Publisher: American Economic Association