Was It Meant to Be? OR Sometimes Playing Match Maker Can Be a Bad Idea: Matching...
source link: http://econometricsense.blogspot.com/2019/02/was-it-meant-to-be-or-sometimes-playing.html
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Sunday, February 17, 2019
Was It Meant to Be? OR Sometimes Playing Match Maker Can Be a Bad Idea: Matching with Difference-in-Differences
Link: https://twitter.com/laura_tastic/status/1022890688525029376
Do you use diff-in-diff? Then this thread is for you.
You’re no dummy. You already know diverging trends in the pre-period can bias your results.
But I’m here to tell you about a TOTALLY DIFFERENT, SUPER SNEAKY kind of bias.
Friends, let’s talk regression to the mean. (1/N) pic.twitter.com/M2tEEsBiyH— Laura Hatfield (@laura_tastic) July 27, 2018
Also, they picked up on this it at the incidental economist and gave a good summary of the key papers here.
You can find citations for the relevant papers below. I won't plagerize what both Laura and the folks at the Incidental Economist have already explained very well. But, at a risk of oversimplifying the big picture I'll try to summarize a bit. Matching in a few special cases can improve the precision of the estimate in a DID framework, and occasionally reduces bias. Remember, that matching on pre-period observables is not necessary for the validity of difference in difference models. There are cases when the treatment group is in fact determined by pre-period outcome levels. In these cases matching is necessary. At other times, if not careful, matching in DID introduces risks for regression to the mean…what Laura Hatfield describes as a ‘bounce back’ effect in the post period that can generate or inflate treatment effects when they do not really exist.
Both the previous discussion on DID in a GLM context and combining matching with DID indicate the risks involved in just plug and play causal inference and the challenges of bridging the gap between theory and application.
References:
Daw, J. R. and Hatfield, L. A. (2018), Matching and Regression to the Mean in Difference‐in‐Differences Analysis. Health Serv Res, 53: 4138-4156. doi:10.1111/1475-6773.12993
Daw, J. R. and Hatfield, L. A. (2018), Matching in Difference‐in‐Differences: between a Rock and a Hard Place. Health Serv Res, 53: 4111-4117. doi:10.1111/1475-6773.13017
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