- Published
- 2022-08-31
- Venue
- American Economic Review Insights, vol. 4, no. 3, pp. 305-322
- Cited by
- 755
- Open access
- No free copy found
- DOI
- 10.1257/aeri.20210236
Abstract
This paper discusses two important limitations of the common practice of testing for preexisting differences in trends (“ pre-trends”) when using difference-in-differences and related methods. First, conventional pre-trends tests may have low power. Second, conditioning the analysis on the result of a pretest can distort estimation and inference, potentially exacerbating the bias of point estimates and under-coverage of confidence intervals. I analyze these issues both in theory and in simulations calibrated to a survey of recent papers in leading economics journals, which suggest that these limitations are important in practice. I conclude with practical recommendations for mitigating these issues. (JEL A14, C23, C51)
Cite this paper
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- APA 7
Roth, J. (2022). Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends. American Economic Review Insights, 4(3), 305–322. https://doi.org/10.1257/aeri.20210236
- MLA 9
Roth, Jonathan. "Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends." American Economic Review Insights, vol. 4, no. 3, 2022, pp. 305–322, https://doi.org/10.1257/aeri.20210236.
- Chicago
Roth, Jonathan. "Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends." American Economic Review Insights 4, no. 3 (2022): 305–322. https://doi.org/10.1257/aeri.20210236.
- GOST
Roth J. Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends // American Economic Review Insights. — 2022. — Vol. 4, № 3. — P. 305–322. — URL: https://doi.org/10.1257/aeri.20210236
- BibTeX
@article{roth2022pretest, title = {{Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends}}, author = {Jonathan Roth}, journal = {American Economic Review Insights}, year = {2022}, volume = {4}, number = {3}, pages = {305--322}, doi = {10.1257/aeri.20210236}, url = {https://doi.org/10.1257/aeri.20210236} }- RIS
TY - JOUR AU - Roth, Jonathan TI - Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends JO - American Economic Review Insights VL - 4 IS - 3 SP - 305 EP - 322 PY - 2022 DA - 2022/08/31 DO - 10.1257/aeri.20210236 UR - https://doi.org/10.1257/aeri.20210236 ER -