Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects

51 Pages Posted: 5 Jun 2019 Last revised: 13 Oct 2021

See all articles by Clément de Chaisemartin

Clément de Chaisemartin

SciencesPo - Sciences Po - Department of Economics

Xavier D'Haultfœuille

Center for Research in Economics and Statistics (CREST)

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Date Written: May 2019

Abstract

Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they identify weighted sums of the average treatment effects (ATE) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression estimand may for instance be negative while all the ATEs are positive. In two articles that have used those regressions, half of the weights are negative. We propose another estimator that solves this issue. In one of the articles we revisit, it is of a different sign than the linear regression estimator.

Suggested Citation

de Chaisemartin, Clément and d'Haultfoeuille, Xavier, Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects (May 2019). Available at SSRN: https://ssrn.com/abstract=3398074

Clément De Chaisemartin (Contact Author)

SciencesPo - Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Xavier D'Haultfoeuille

Center for Research in Economics and Statistics (CREST) ( email )

5 avenue Henry le Chatelier
Palaiseau, 91120
France

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