A simple test of parallel pre-trends for Differences-in-Differences

Riveros-Gavilanes, J. M. (2023): A simple test of parallel pre-trends for Differences-in-Differences.

Abstract

Traditional tests for parallel trends in the context of differences-in-differences are based on the observation of the mean values of the dependent variable in the treatment and control groups over time. However, given the new discussions brought by the development of the event study designs, it is clear that controlling for observable factors may intervene in the fulfilment of the parallel trend as-sumption. This article presents a simple test based on the statistical significance of pre-treatment periods which can be extended from the classic differences-in-differences up to event study designs in universal absorbing treatments. The test requires at least two pre-treatment periods and can done by constructing appro-priate dummy variables.

• Item Type: MPRA Paper
• Language: English
• Keywords: difference in difference; parallel trend test; treatment.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General

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