Cross Validated Asked by gannawag on January 3, 2022

I have panel data with many groups $i$ and two time periods $t$.

I want to know the effect of a binary treatment $D$ on a continuous outcome $Y$. Some groups go from untreated to treated, while others are treated in both periods, and others are untreated in both periods.

I am considering two approaches, and I’m curious about the differences between the two.

**Approach 1: Fixed effects with panel data**

I shape the data into long format, where each observation is a group-time period (so each group has two observations in this case). Then I run the following regression:

$Y_{it} = delta_1 D_{it} + alpha_i + gamma_t + epsilon_{it} $

Where $alpha_i$ is a group-level fixed effect, and $gamma_t$ is a time period-level fixed effect (in this case it would just be a dummy for the second time period).

**Approach 2: including lagged variables with cross section data**

Reshape the data into wide format, so each observation is a group. Then I have two new variables that are the lagged outcome value ($Y_{t-1}$), and the lagged treatment status variable ($D_{t-1}$). The $i$ subscript is gone. Run the following regression:

$Y_{t} = delta_2 D_{t} + beta_1 D_{t-1} + beta_2 Y_{t-1} + nu_{t} $

**Question:**

What is the difference between the two approaches? Is one generally preferred or is it context-specific?

1 Asked on November 12, 2021

machine learning precision recall random forest unbalanced classes

1 Asked on November 12, 2021

1 Asked on November 12, 2021

1 Asked on November 12, 2021

binary data classification precision recall unbalanced classes

0 Asked on November 12, 2021 by vineet

0 Asked on November 12, 2021

1 Asked on November 12, 2021 by stephen-clark

1 Asked on November 12, 2021 by user6703592

0 Asked on November 12, 2021

1 Asked on November 12, 2021 by emma-jean

0 Asked on November 12, 2021 by rbeginner

1 Asked on November 12, 2021

1 Asked on November 12, 2021

cox model mathematical statistics r survival time varying covariate

2 Asked on November 9, 2021 by jennifer-ruurs

1 Asked on November 9, 2021 by joy_1379

1 Asked on November 9, 2021 by astel

errors in training hyperparameter supervised learning tuning

Get help from others!

Recent Questions

- How Do I Get The Ifruit App Off Of Gta 5 / Grand Theft Auto 5
- Iv’e designed a space elevator using a series of lasers. do you know anybody i could submit the designs too that could manufacture the concept and put it to use
- Need help finding a book. Female OP protagonist, magic
- Why is the WWF pending games (“Your turn”) area replaced w/ a column of “Bonus & Reward”gift boxes?
- Does Google Analytics track 404 page responses as valid page views?

Recent Answers

- Joshua Engel on Why fry rice before boiling?
- Lex on Does Google Analytics track 404 page responses as valid page views?
- Jon Church on Why fry rice before boiling?
- Peter Machado on Why fry rice before boiling?
- haakon.io on Why fry rice before boiling?

© 2023 AnswerBun.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP