arXiv 10 Dec 2023 · Econometrics · 2 citations (OpenAlex)
arXiv:2312.05985 · PDF · DOI · OpenAlex · Extracted main text
To address the bias of the canonical two-way fixed effects estimator for difference-in-differences under staggered adoptions, Wooldridge (2021) proposed the extended two-way fixed effects estimator, which adds many parameters. However, this reduces efficiency. Restricting some of these parameters to be equal (for example, subsequent treatment effects within a cohort) helps, but ad hoc restrictions may reintroduce bias. We propose a machine learning estimator with a single tuning parameter, fused extended two-way fixed effects (FETWFE), that enables automatic data-driven selection of these restrictions. We prove that under an appropriate sparsity assumption FETWFE identifies the correct restrictions with probability tending to one, which improves efficiency. We also prove the consistency, oracle property, and asymptotic normality of FETWFE for several classes of heterogeneous marginal treatment effect estimators under either conditional or marginal parallel trends, and we prove the same results for conditional average treatment effects under conditional parallel trends. We provide an R package implementing fused extended two-way fixed effects, and we demonstrate FETWFE in simulation studies and an empirical application.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | B. Callaway and P. H. Sant'Anna (2021) Difference-in-differences with multiple time periods | 1.000 | 11 | 4 | 100% |
| 2 | A. Goodman-Bacon (2021) Difference-in-differences with variation in treatment timing | 1.000 | 9 | 5 | 100% |
| 3 | L. Sun and S. Abraham (2021) Estimating dynamic treatment effects in event studies with heterogeneous treatment effects | 1.000 | 7 | 3 | 100% |
| 4 | K. Borusyak, X. Jaravel, and J. Spiess (2024) Revisiting event study designs: Robust and efficient estimation | 1.000 | 6 | 3 | 100% |
| 5 | J. M. Wooldridge (2021) Two-way fixed effects, the two-way mundlak regression, and difference-in-differences estimators | 0.934 | 38 | 10 | 82% |
| 6 | B. Stevenson and J. Wolfers (2006) Bargaining in the shadow of the law: Divorce laws and family distress | 0.874 | 5 | 2 | 100% |
| 7 | G. Faletto (2025) fetwfe: Fused Extended Two-Way Fixed Effects, 2025 | 0.843 | 3 | 3 | 100% |
| 8 | P. H. Sant'Anna and J. Zhao (2020) Doubly robust difference-in-differences estimators | 0.843 | 3 | 3 | 100% |
| 9 | J. Huang, J. L. Horowitz, and S. Ma (2008) Asymptotic properties of bridge estimators in sparse high-dimensional regression models | 0.737 | 4 | 3 | 50% |
| 10 | C. De Chaisemartin and X. d'Haultfoeuille (2020) Two-way fixed effects estimators with heterogeneous treatment effects | 0.737 | 3 | 2 | 100% |
Showing the top 10 of 132 scored citations.