That’s the query posed in paper by way of Baker, Larcker and Wang (2022). I summarize their key arguments under.
The validity of…[the DiD]…way rests at the central assumption that the noticed development in regulate gadgets’ results mimic the craze in remedy gadgets’ results had they no longer won remedy. Because the authors write:
First, DiD estimates are independent in settings with a unmarried remedy length, even if there are dynamic remedy results. 2d, DiD estimates also are independent in settings with staggered timing of remedy project and homogeneous remedy impact throughout companies and through the years. In spite of everything, when analysis settings mix staggered timing of remedy results and remedy impact heterogeneity, staggered DiD estimates are most likely biased.
Oftentimes, DiD is carried out the use of an odd least squares (OLS) regression founded type as follows:
When there are greater than two teams and greater than and a couple of time sessions, regression-based DiD fashions most often depend on two-way mounted impact (TWFE) of the shape:
The place the primary two coefficients are unit and period of time
mounted results. Word that earlier analysis from Goodman-1st baron beaverbrook
(2021) displays that static types of the TWFE DiD is…