Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects

Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE ) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator. (JEL C21, C23, D72, J31, J51, L82)

• Publication year

  2018

• Venue

  The American Economic Review

• Publication date

  2018-03-21

• Fields of study

  Mathematics, Economics

• Identifiers
  DOI 10.1257/aer.20181169arXiv 1803.08807
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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