Matching vs Differencing when Estimating Treatment Effects with Panel Data: the Example of the Effect of Job Training Programs on Earnings

Chabé-Ferret, Sylvain (2012) Matching vs Differencing when Estimating Treatment Effects with Panel Data: the Example of the Effect of Job Training Programs on Earnings. TSE Working Paper, n. 12-356

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Official URL: http://tse-fr.eu/pub/26567

Abstract

This paper compares matching and Difference-In-Difference matching (DID)
when estimating the effect of a program on a dynamic outcome. I detail the
sources of bias of each estimator in a model of entry into a Job Training Program
(JTP) and earnings dynamics that I use as a working example. I show that
there are plausible settings in which DID is consistent while matching on past
outcomes is not. Unfortunately, the consistency of both estimators relies on conditions
that are at odds with properties of earnings dynamics. Using calibration
and Monte-Carlo simulations, I show that deviations from the most favorable
conditions severely bias both estimators. The behavior of matching is nevertheless
less erratic: its bias generally decreases when controlling for more past
outcomes and it generally provides a lower bound on the true treatment effect.
I finally point to previously unnoticed empirical results that confirm that DID
does well, and generally better than matching on past outcomes, at replicating
the results of an experimental benchmark.

Item Type: Monograph (Working Paper)
Date: October 2012
Uncontrolled Keywords: Matching - Difference in Difference - Evaluation of Job training Programs
JEL codes: C21 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
C23 - Models with Panel Data
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:31
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:26567
URI: http://publications.ut-capitole.fr/id/eprint/15449

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