A Linear Panel Model with Heterogeneous Coefficients and Variation in Exposure
Bibliographic Data
| ID | 14855288 |
|---|---|
| Authors | Liyang Sun (0000-0003-2833-2085, Liyang Sun is Postdoctoral Research Fellow, University of California Berkeley, Berkeley, California and Assistant Professor, CEMFI (Center for Monetary and Financial Studies), Madrid, Spain.), Jesse M Shapiro (Jesse M. Shapiro is George Gund Professor of Economics and Business Administration, Harvard University, Cambridge, Massachusetts and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts.) |
| Year | 2022 |
| Volume | 36 |
| Issue | 4 |
| Pages | 193-204 |
| Publication date | 2022-11-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Journal of Economic Perspectives (JOURNAL) |
| Journal identifiers | ISSN: 0895-3309 • E-ISSN: 1944-7965 |
| Publisher | American Economic Association (PUBLISHER • US) |
| DOI | 10.1257/jep.36.4.193 |
| OpenAlex | W4308472316 |
| Language | EN |
| Citations received | 6 |
| References cited | 1 |
Linear panel models featuring unit and time fixed effects appear in many areas of empirical economics. An active literature studies the interpretation of the ordinary least squares estimator of the model, commonly called the two-way fixed effects (TWFE) estimator, in the presence of unmodeled coefficient heterogeneity. We illustrate some implications for the case where the research design takes advantage of variation across units (say, US states) in exposure to some treatment (say, a policy change). In this case, the TWFE can fail to estimate the average (or even a weighted average) of the units’ coefficients. Under some conditions, there exists no estimator that is guaranteed to estimate even a weighted average. Building on the literature, we note that when there is a unit totally unaffected by treatment, it is possible to estimate an average effect by replacing the TWFE with an average of difference-in-differences estimators
Econometrics · Economics · Estimator · Fixed effects model · Ordinary least squares · Panel data · Statistics · Advanced Causal Inference Techniques · Fiscal Policy and Economic Growth · Mathematics · Spatial and Panel Data Analysis · Applied Mathematics
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| Citations per year | 3 |
|---|---|
| Citation span | 2024 - 2026 (3) |
| Highly cited | No |