1 Review of the Basic Methodology

Imbens/Wooldridge, Lecture Notes 10, Summer 07 What s New in Econometrics?NBER,Summer 2007 Lecture 10,Tuesday,July 31st, pmDifference-in-Differences EstimationThese notes provide an overview of standard difference-in-differences methods that havebeen used to study numerous policy questions. We consider some recent advances in Hansen(2007a,b) on issues of inference, focusing on what can be learned with various group/timeperiod dimensions and serial independence in group-level shocks. Both the repeated crosssections and panel data cases are considered. We discuss recent work by Athey and Imbens(2006) on nonparametric approaches to difference-in-differences, and Abadie, Diamond, andHainmueller (2007) on constructing synthetic control of the Basic MethodologySince the work by Ashenfelter and Card (1985), the use of difference-in-differencesmethods has become very widespread. The simplest set up is one where outcomes are observedfor two groups for two time periods.

Imbens/Wooldridge, Lecture Notes 10, Summer ’07 Inference based on even moderate sample sizes in each of the four groups is straightforward, and is easily made robust to different group/time period variances in the regression framework.

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