A0612
Title: Testing for equivalence of pre-trends in difference-in-differences estimation
Authors: Martin Schumann - Maastricht University (Netherlands) [presenting]
Holger Dette - Ruhr-Universitaet Bochum (Germany)
Abstract: The plausibility of the parallel trends assumption (PTA) in Difference-in-Differences estimation is usually assessed by a test of the null hypothesis that the difference between the means of both groups is constant over time before the treatment. However, failure to reject the null hypothesis does not imply the absence of differences in time trends between both groups. We provide three tests of equivalence that allow researchers to specify a threshold below which differences in trends are deemed negligible. Our test procedures build on a simple regression and can thus be adapted to various situations of interest, e.g. heterogeneous treatment timings.
