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)

Keywords

EstimatorLinear regressionEconometricsMathematicsRegressionEconomicsStatisticsFixed effects modelAverage treatment effectPanel data

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Publication Info

Year
2020
Type
article
Volume
110
Issue
9
Pages
2964-2996
Citations
3759
Access
Closed

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Clément de Chaisemartin, Xavier D’Haultfœuille (2020). Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects. American Economic Review , 110 (9) , 2964-2996. https://doi.org/10.1257/aer.20181169

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DOI
10.1257/aer.20181169