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How much should we trust staggered difference-in-differences estimates?

Andrew C. Baker (Stanford University), David F. Larcker (Stanford University), Charles C. Y. Wang (Harvard University)

Journal of Financial Economics
License: CC BY

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.

Published on 22 Feb. 2022