Estimating Difference-in-Differences in the Presence of Spillovers

Clarke, Damian (2017): Estimating Difference-in-Differences in the Presence of Spillovers.

Abstract

I propose a method for difference-in-differences (DD) estimation in situations where the stable unit treatment value assumption is violated locally. This is relevant for a wide variety of cases where spillovers may occur between quasi-treatment and quasi-control areas in a (natural) experiment. A flexible methodology is described to test for such spillovers, and to consistently estimate treatment effects in their presence. This spillover-robust DD method results in two classes of estimands: treatment effects, and “close” to treatment effects. The methodology outlined describes a versatile and non-arbitrary procedure to determine the distance over which treatments propagate, where distance can be defined in many ways, including as a multi-dimensional measure. This methodology is illustrated by simulation, and by its application to estimates of the impact of state-level text-messaging bans on fatal vehicle accidents. Extending existing DD estimates, I document that reforms travel over roads, and have spillover effects in neighbouring non-affected counties. Text messaging laws appear to continue to alter driving behaviour as much as 30 km outside of affected jurisdictions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Policy evaluation, difference-in-differences, spillovers, natural experiments, SUTVA
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions; D - Microeconomics > D0 - General > D04 - Microeconomic Policy: Formulation, Implementation, and Evaluation; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R41 - Transportation: Demand, Supply, and Congestion ; Travel Time ; Safety and Accidents ; Transportation Noise

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