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Bank
Human
Development
Network
Spanish
Impact
Evaluation
Fund
www.worldbank.org/hdchiefeconomist
DIFFERENCE
IN
DIFFERENCE
& PANEL
S
DATA
This material constitutes supporting material for the "Impact Evaluation in Practice" book. This additional material is made freely but please acknowledge its use as follows: Gertler, P. J.; Martinez, S., Premand, P., Rawlings, L. B. and Christel M. J. Vermeersch,
2010, Impact Evaluation in Practice: Ancillary Material, The World Bank, Washington DC (www.worldbank.org/ieinpractice). The content of this presentation reflects the views of the authors and not necessarily those of the World Bank.
evaluation.
3 ways to looks at
DD
In a Box
Graphically
In a
Regression
The box
After the
program start
Before the
program start
Group affected by
the policy change
(treatment)
Y1 (ui ) | Di=1
Y1 (ui ) | Di=0
Y 0 (ui ) | Di=1
Y0 (ui ) | Di=0
(Y1Y |D=1)-(Y0Y |
D=1)
(Y1Y |D=0)-(Y0Y |
D=0)
DD=[(Y1Y1|D=1)-(Y0Y0|D=1)] - [(Y1Y1|D=0)-(Y0Y0|
D=0)]
Outcome
Variable
Graphically
Not
enrolled
Y0 | Di=0
Y1 | Di=0
Y1 | Di=1
Enrolle
d
Estimated
ATE
Y0 | Di=1
T=0
T=1
Time
DD=[(Y1Y1|D=1)-(Y0Y0|D=1)] - [(Y1Y1|D=0)-(Y0Y0|
E (Yi1 | Di 1) ???
E (Yi 0 | Di 1) ???
E (Yi1 | Di 0) ???
E (Yi 0 | Di 0) ???
it
E (Yi1 | Di 1) .1 .1 .1.1 E ( i1 | Di 1)
E (Yi 0 | Di 1) .0 .1 .0.1 E ( i 0 | Di 1)
E (Yi1 | Di 0) .1 .0 .1.0 E ( i1 | Di 0)
E (Yi 0 | Di 0) .0 .1 .0.0 E ( i 0 | Di 0)
Identification in DD
The identification of the treatment effect
is based on the inter-temporal variation
between the groups.
I.e. Changes in the outcome variable Y
over time, that are specific to the
treatment groups.
I.e. Jumps in trends in the outcome
variable, that happen only for the
treatment groups, not for the comparison
groups, exactly at the time that the
treatment kicks in.
Warnings
DD/ fixed effects control for:
o Fixed group effects. E.g. Farmers who own
their land, farmers who dont own their land
Warnings
DD attributes any differences in trends
between the treatment and control
groups, that occur at the same time as
the intervention, to that intervention.
If there are other factors that affect the
difference in trends between the two
groups, then the estimation will be
biased!
Outcome
Variable
Y1 | Di=0
Y1 | Di=1
Estimate
d Impact
Enrolle
d
Bias
Y0 | Di=1
T=0
T=1
Time
o
o
Example 1
Research questions
School
infrastructur
e
Educational
achievement
Educational
achievement?
Salary level?
Program description
1973-1978: The Indonesian government built
61,000 schools equivalent to one school per
500 children between 5 and 14 years old
The enrollment rate increased from 69% to
85% between 1973 and 1978
The number of schools built in each region
depended on the number of children out of
school in those regions in 1972, before the
start of the program.
Identification of the
treatment effect
There are 2 sources of variations in the
intensity of the program for a given individual:
By region
There is variation in the number of schools received
in each region.
By age
o Children who were older than 12 years in 1972
did not benefit from the program.
o The younger a child was 1972, the more it
benefited from the program because she spent
more time in the new schools.
Sources of data
1995 population census.
Individual-level data on:
o birth date
o 1995 salary level
o 1995 level of education
High
Low
2-6
8.49
9.76
8.02
9.4
0.47
0.36
(young cohort)
12-17
(older cohort)
Difference
0.12 DD
(0.089)
schooling
Age in 1974
High
Low
Differenc
e
2-6
8.49
9.76
-1.27
8.02
9.4
-1.39
(young cohort)
12-17
(older cohort)
0.12 DD
(0.089)
Placebo DD
(Cf. p.798, Table 3, panel B)
Idea:
Age in 1974
High
Low
12-17
8.02
9.40
18-24
7.70
9.12
Difference
0.32
0.28
0.034 DD
(0.098)
k cohort fixed-effect
j district of birth fixed-effect
ijk error term for person i in region j in cohort k
23
l 2
l 2
Age in 1974
Conclusion
Results: For each school built per 1000
students;
o The average educational achievement
increase by 0.12- 0.19 years
o The average salaries increased by 2.6
5.4 %
Example 2
Number of
municipalities
Always public
196
39.7
%
143
28.9
%
Always a
not-for-profit
cooperative
Converted
from public to private
138
Always private
No information
1
16
Total
494
27.9
%
0.2%
3.2%
100
%
% Accumulated
25
20
15
10
0
1990
1991
1992
1993
1994
1995
Year
1996
1997
1998
1999
Regression
y
dI
it
it
xit t i
it
where
yit infant mortality rate in munic. i in year t
dI it dummy variable that takes value 1 if
municipality i has private water provider in year t
xit vector of covariates
DD results: Privatization
reduced infant mortality
Sensitivity analysis
1 Check that the trends in infant mortality were
identical in the two types of municipalities
before privatization
DD on common support
Average
mortality per
100, 1990
Estimated
impact
% change
in
mortality
Non-poor
5.15
0.105
Poor
7.15
-0.767***
-10.7%
Very poor
9.46
-2.214***
-23.4%
Conclusion
Using a combination of methods, we found that:
Privatization of water services is associated
with a reduction in infant mortality of 5-7%.
The reduction of mortality is:
o Due to fewer deaths from infectious and
parasitic diseases.
o Not due to changes in death rates from reasons
not related to water and sanitation
References
Abadie, A. (2005). Semiparametric Difference-in-Differences
Estimators, Review of Economic Studies, 72.
Ashenfelter, O. (1978): Estimating the Effect of Training
Programs on Earnings, The Review of Economic and Statistics,
60, 1. pp. 47-57.
Bertrand, M., Duflo, E. and S. Mullainathan (2004). How much
should
we
trust
differences-in-differences
Estimates?,
Quarterly Journal of Economics.
Chay, Ken, McEwan, Patrick and Miguel Urquiola (2005): The
central role of noise in evaluating interventions that use test
scores to rank schools, American Economic Review, 95, pp.
1237-58.
Duflo, E. (2001). Schooling and Labor Market Consequences of
School Construction in Indonesia: Evidence From an Unusual
Policy Experiment, American Economic Review, Sept 2001
Galiani, S., Gertler, P. and E. Schargrodsky (2005): Water for
Life: The Impact of the Privatization of Water Services on Child
Mortality, Journal of Political Economy, Volume 113, pp. 83-120.
Gertler, Paul (2004): Do Conditional Cash Transfers Improve
Child Health? Evidence from PROGRESAs Control Randomized
Experiment, American Economic Review, 94, pp. 336-41.
Thank You
Q&A