Inference in Differences-in-Differences with Few Treated Groups and Heteroskedasticity

Ferman, Bruno; Pinto, Cristine

doi:10.1162/rest_a_00759

Cited by 180Advanced Causal Inference TechniquesSpatial and Panel Data AnalysisStatistical Methods and Bayesian Inference

Inference in Differences-in-Differences with Few Treated Groups and Heteroskedasticity

Ferman, Bruno, Pinto, Cristine·2019·The Review of Economics and Statistics

DOI 10.1162/rest_a_00759

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Abstract

We derive an inference method that works in differences-in-differences settings with few treated and many control groups in the presence of heteroskedasticity. As a leading example, we provide theoretical justification and empirical evidence that heteroskedasticity generated by variation in group sizes can invalidate existing inference methods, even in data sets with a large number of observations per group. In contrast, our inference method remains valid in this case. Our test can also be combined with feasible generalized least squares, providing a safeguard against misspecification of the serial correlation.

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Ferman and Pinto (2019) extend Conley and Taber to allow for heteroskedasticity from group sizes or observables, but must still restrict heterogeneity based on unobserved characteristics.
“Ferman and Pinto (2019) extend the approach of Conley and Taber (2011) to allow for heteroskedasticity caused by heterogeneity in group sizes or other observable characteristics, but must still restrict heterogeneity based on unobserved characteristics (e.g. unobserved treatment effect heterogeneity).”
From What's trending in difference-in-differences? A synthesis of the recent econometrics literature (2023) · cites this paper as Ferman and Pinto (2019)

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Authors: Ferman, B., & Pinto, C.
Affiliations: Escola de Economia de São Paulo (BR)
ORCID: Ferman, Bruno
Pinto, Cristine
Venue: The Review of Economics and Statistics
Publisher: MIT Press
Published: 2019-07
Volume: 101
Issue: 3
Pages: 452-467
ISSN: 0034-6535 (ISSN-L)
1530-9142
DOI: 10.1162/rest_a_00759
OpenAlex: W2113132502
Cited by: 178
References: 37
Citations by year: 2026: 41 · 2025: 19 · 2024: 20 · 2023: 14 · 2022: 21 · 2021: 24 · 2020: 18 · 2019: 12 · 2018: 3 · 2017: 3 · 2016: 2 · 2015: 1
FWCI: 11.83
Type: journal article
Language: en
Open access: closed
Locations: The Review of Economics and Statistics (publishedVersion)
RePEc: Research Papers in Economics (submittedVersion)
Topics: Physical Sciences › Mathematics › Statistics and Probability › Advanced Causal Inference Techniques
Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Spatial and Panel Data Analysis
Physical Sciences › Mathematics › Statistics and Probability › Statistical Methods and Bayesian Inference
Keywords: difference-in-differences, heteroscedasticity, inference, serial correlation, feasible generalized least squares, model misspecification, causal inference

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Inference in Differences-in-Differences with Few Treated Groups and Heteroskedasticity

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