Wednesday, June 21, 2017

Difference-in-differences for spatial data

It just came to my knowledge today that Raymond Florax passed away a couple of months ago (in memorian). Prof. Florax was very influential in the field of spatial econometrics. In one his latest papers, he co-authored with Delgado and proposed a difference-in-differences method for spatial data, controlling for spatial dependence. Here is the paper.

Delgado, M. S., & Florax, R. J. (2015). Difference-in-differences techniques for spatial data: Local autocorrelation and spatial interaction. Economics Letters, 137, 123-126.

We consider treatment effect estimation via a difference-in-difference approach for spatial data with local spatial interaction such that the potential outcome of observed units depends on their own treatment as well as on the treatment status of proximate neighbors. We show that under standard assumptions (common trend and ignorability) a straightforward spatially explicit version of the benchmark difference-in-differences regression is capable of identifying both direct and indirect treatment effects. We demonstrate the finite sample performance of our spatial estimator via Monte Carlo simulations.

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