Lecture 9: Difference in Differences

Question 1

What the two classic difference-in-difference examples?

Answer 1

Question 2

Explain how DiD was used to prove the Cholera in London case

Answer 2

Question 3

How can DiD be used to estimate the impact of minimum wages on employment?

Answer 3

Question 4

Explain the below table fo results

Answer 4

Question 5

What is the key identification assumption in a DiD analysis?

Answer 5

Question 6

What is the parallel trend assumption?

Answer 6

Question 7

What are the two additional assumptions for a valid DiD? (apart from the parallel trend assumption)?

Answer 7

Question 8

What is the standard DiD regression equation?

Answer 8

Question 9

What are the 3 potential violations of the DiD assumptions?

Answer 9

1. Selection on unobservable group-specific fixed effects
2. differential macro trends
3. slection on unobservble idiosyncrastic shocks

Question 10

Explain how selection on unobservable group-specific fixed effects could violate the DiD assumptions?

Answer 10

Question 11

Explain how different macro trends could violate the DiD assumptions?

Answer 11

Question 12

Explain how one could control/test for different macro trends in a DiD experiment?

Answer 12

Question 13

Explain how selection on unobservable idiosyncratic shocks could violate the DiD assumptions?

Answer 13

Question 14

Explain why unobservable idiosyncratic shocks might be possible and give examples

Answer 14