Difference‐In‐Difference Estimation by FE and OLS When There is Panel Non‐Response

15 Pages Posted: 16 Nov 2015

See all articles by Michael Lechner

Michael Lechner

University of St. Gallen - Swiss Institute for Empirical Economic Research

Núria Rodríguez-Planas

City University New York (CUNY), Queens College; IZA Institute of Labor Economics

Daniel Fernández-Kranz

IE Business School

Abstract

We show that the OLS and fixed‐effects (FE) estimators of the popular difference-in-differences model may deviate when there is time varying panel non-response. If such non-response does not affect the common-trend assumption, then OLS and FE are consistent, but OLS is more precise. However, if non-response is affecting the common-trend assumption, then FE estimation may still be consistent, while OLS will be inconsistent. We provide simulation as well as empirical evidence for this phenomenon to occur. We conclude that in case of unbalanced panels, deviating OLS and FE estimates should be considered as evidence that non‐response is not ignorable for the differences-in-differences estimation.

Keywords: difference-in-difference estimation, attrition, panel estimation, balanced panel, unbalanced panel

JEL Classification: C21, C31

Suggested Citation

Lechner, Michael and Rodriguez-Planas, Nuria and Fernandez-Kranz, Daniel, Difference‐In‐Difference Estimation by FE and OLS When There is Panel Non‐Response. IZA Discussion Paper No. 9490, Available at SSRN: https://ssrn.com/abstract=2690738

Michael Lechner (Contact Author)

University of St. Gallen - Swiss Institute for Empirical Economic Research ( email )

Varnbuelstrasse 14
St. Gallen, 9000
Switzerland
+41 71 224 2320 (Phone)

Nuria Rodriguez-Planas

City University New York (CUNY), Queens College ( email )

65-30 Kissena Blvd
Flushing, NY 11367-1597
United States

HOME PAGE: http://https://sites.google.com/site/nuriarodriguezplanas/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Daniel Fernandez-Kranz

IE Business School ( email )

c/ Mª de Molina, 11
Madrid, 28006
Spain
(0034) 915689600 (Phone)

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