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On Event Studies and Distributed-Lags in Two-Way Fixed Effects Models: Identification, Equivalence, and Generalization

Author

Listed:
  • Kurt Schmidheiny

    (University of Basel, CEPR and CESifo)

  • Sebastian Siegloch

    (University of Cologne, CEPR, ZEW, IZA and CESifo)

Abstract
We discuss properties and pitfalls of panel-data event study designs. We derive three main results. First, assuming constant treatment effects before and/or after some event time, also known as binning, is a natural restriction imposed on theoretically infinite effect windows. Binning identifies dynamic treatment effects in the absence of never-treated units and is particularly suitable in case of multiple events. Second, event study designs with binned endpoints and distributed-lag models are numerically identical leading to the same parameter estimates after correct reparametrization. Third, classic dummy variable event study designs can be generalized to models that account for multiple events of different sign and intensity of the treatment, which are common in public and labor economics. We demonstrate the practical relevance of our methodological points in an application studying the effects of unemployment benefit duration on job search effort.

Suggested Citation

  • Kurt Schmidheiny & Sebastian Siegloch, 2022. "On Event Studies and Distributed-Lags in Two-Way Fixed Effects Models: Identification, Equivalence, and Generalization," ECONtribute Discussion Papers Series 201, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:201
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    event study; distributed-lag; applied microeconomics; credibility revolution;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H00 - Public Economics - - General - - - General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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