SEMINAR SERIES
Applied Microeconomics Seminar (Joint with Econometrics Seminar, KIER)
Shoya Ishimaru(Assistant Professor, Department of Economics, Hitotsubashi University)
- Date&Time:
- 2024.9.20 (Fri) 10:30-12:00
- Venue:
- Seminar Room 201 on 2F, Faculty of Law and Faculty of Economics, East Bldg., Yoshida Campus, Kyoto University
- Language:
- English
- Contact:
- Ken Yamada, Takahide Yanagi
(Title)
"What Do We Get from Two-Way Fixed Effects Regressions? Implications from Numerical Equivalence"
Abstract:
In any multiperiod panel, a two-way fixed effects (TWFE) regression is numerically equivalent to a first-difference (FD) regression that pools all possible between-period gaps. Building on this observation, this paper develops numerical and causal interpretations of the TWFE coefficient. At the sample level, the TWFE coefficient is a weighted average of FD coefficients with different between-period gaps. This decomposition is useful for assessing the source of identifying variation for the TWFE coefficient. At the population level, a causal interpretation of the TWFE coefficient requires a common trends assumption for any between-period gap, and the assumption has to be conditional on changes in time-varying covariates. I propose a natural generalization of the TWFE estimator that can relax these requirements.
You can refer to the website of Econometrics seminar, KIER; from here