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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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.

Available Versions of this Item

• Matching vs Differencing when Estimating Treatment Effects with Panel Data: the Example of the Effect of Job Training Programs on Earnings. (deposited 09 Jul 2014 17:31) [Currently Displayed]
  • Analysis of the bias of Matching and Difference-in-Difference under alternative earnings and selection processes. (deposited 16 Mar 2015 14:56)