I am running some robustness checks to my diff-in-diff specification. In particular, I am trying to check if the parallel trend assumption is satisfied. I am following the suggestion reported here https://stats.stackexchange.com/ques...mon-trend-betw.
Thus, given my dataset, I am running an -xtreg, fe- where log_GON is my dependent variable and the diff-in-diff variable would be treated_decr*post_decr, i.e. the interaction between the dummy of being in the treated group and being post the date of implementation of the policy I am interested in. The year of implementation is 1995. Thus following the suggestion in the link I am running a diff-in-diff model with leads and lags for the diff-in-diff term and I am planning to test if the two pre-treatment terms, i.e. the ones in 1994 and 1993 are jointly non significant.
The code and the outcomes are the following
and then the test gives me
My main doubt is about the specification. It makes sense to me but I am not 100% sure about it because I removed treated_decr#1992.year on purpose to keep it as a baseline but I would add treated_decr#1995.year, the real diff-in-diff coefficient of interest.
Do you have any hint?
Thus, given my dataset, I am running an -xtreg, fe- where log_GON is my dependent variable and the diff-in-diff variable would be treated_decr*post_decr, i.e. the interaction between the dummy of being in the treated group and being post the date of implementation of the policy I am interested in. The year of implementation is 1995. Thus following the suggestion in the link I am running a diff-in-diff model with leads and lags for the diff-in-diff term and I am planning to test if the two pre-treatment terms, i.e. the ones in 1994 and 1993 are jointly non significant.
The code and the outcomes are the following
Code:
xtreg log_GON treated_decr#1994.year treated_decr#1993.year treated_decr#1996.year /// treated_decr#1997.year treated_decr#1998.year c.year c.year#i.state /// if (state == 2|state == 5|state == 6|state == 8) & year >= 1985, cluster(state) fe basel
Code:
Fixed-effects (within) regression Number of obs = 128 Group variable: state Number of groups = 4 R-sq: Obs per group: within = 0.3827 min = 32 between = 0.1068 avg = 32.0 overall = 0.0748 max = 32 F(3,3) = . corr(u_i, Xb) = -0.9994 Prob > F = . (Std. Err. adjusted for 4 clusters in state) ----------------------------------------------------------------------------------- | Robust log_GON | Coef. Std. Err. t P>|t| [95% Conf. Interval] ------------------+---------------------------------------------------------------- treated_decr#year | 0 1993 | 0 (base) 0 1994 | -.4768764 .1315696 -3.62 0.036 -.8955894 -.0581633 0 1996 | -.4627052 .4205494 -1.10 0.352 -1.801081 .8756705 0 1997 | -.0429162 .4332989 -0.10 0.927 -1.421867 1.336034 0 1998 | -.0507665 .2062129 -0.25 0.821 -.7070279 .6054949 1 1993 | -.7470444 3.39e-08 -2.2e+07 0.000 -.7470445 -.7470443 1 1994 | -.8624563 2.99e-08 -2.9e+07 0.000 -.8624564 -.8624562 1 1996 | -.6488787 2.18e-08 -3.0e+07 0.000 -.6488787 -.6488786 1 1997 | -.5308411 1.78e-08 -3.0e+07 0.000 -.5308412 -.5308411 1 1998 | -.1217581 1.38e-08 -8.8e+06 0.000 -.1217582 -.1217581 | year | .0501079 4.00e-09 1.3e+07 0.000 .0501078 .0501079 | state#c.year | SA | -.0288139 .0015684 -18.37 0.000 -.0338051 -.0238227 Tas | -.0237483 .0015684 -15.14 0.001 -.0287395 -.018757 WA | -.0365106 .0015684 -23.28 0.000 -.0415019 -.0315194 | _cons | -52.61188 2.378725 -22.12 0.000 -60.18204 -45.04172 ------------------+---------------------------------------------------------------- sigma_u | 31.831812 sigma_e | .47882443 rho | .99977378 (fraction of variance due to u_i) -----------------------------------------------------------------------------------
Code:
test 1.treated_decr#1993b.year 1.treated_decr#1994.year
Code:
( 1) 1.treated_decr#1993b.year = 0 ( 2) 1.treated_decr#1994.year = 0 Constraint 2 dropped F( 1, 3) = 4.9e+14 Prob > F = 0.0000
Do you have any hint?