AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
(Empirical) Bayes Approaches to Parallel Trends
AEA Papers and Proceedings
vol. 114,
May 2024
(pp. 606–09)
Abstract
We consider Bayes and Empirical Bayes (EB) approaches for dealing with violations of parallel trends. In the Bayes approach, the researcher specifies a prior over both the pretreatment violations of parallel trends δpre and the posttreatment violations δpost. The researcher then updates their posterior about the posttreatment bias δpost given an estimate of the pre-trends δpre. This allows them to form posterior means and credible sets for the treatment effect of interest, τpost. In the EB approach, the prior on the violations of parallel trends is learned from the pretreatment observations. We illustrate these approaches in two empirical applications.Citation
Kwon, Soonwoo, and Jonathan Roth. 2024. "(Empirical) Bayes Approaches to Parallel Trends." AEA Papers and Proceedings, 114: 606–09. DOI: 10.1257/pandp.20241048Additional Materials
JEL Classification
- C11 Bayesian Analysis: General
- C21 Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions