A Note on Difference-in-Difference and Triple Difference Estimators

Xi Chen
Cornell University
http://web.cenet.org.cn/web/ecocxi/
Single-Difference (D) Estimator
- Only require a single survey
- Selection bias BTT ( X ) and missing data on YitT for Tit = 0 and YitC for Tit = 1

- More insight if outcomes tracked for both participants and nonparticipants over time
The Double-Difference estimator
- Essential idea: compare samples of participants and non-participants before and after
the intervention (initial baseline survey of both non-participants and (subsequent)
participants + follow-up survey of both groups after the intervention)
o Calculates the difference between the after and before values of the mean
outcomes for each of the treatment and comparison groups
o The difference between these two mean differences is the impact estimate
- How to solve the missing-data problem? The DD estimator assumes that the selection
bias BTT ( X ) is time invariant: outcome changes for non-participants reveal the
counterfactual outcome changes.

- Weaker assumption than BTT ( X ) = 0 in Single-Difference Estimation

- DD estimator gives the mean treatment effect on the treated for period 1:

- Regression based DD estimator: The data over both time periods and across treatment
status are pooled and one runs the regression:
o The single-difference estimator
o The DD estimator
- Notice: balanced panel not necessary; can be generalized to multiple periods
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Concerns about the DD Estimator

- Ex ante prediction of programs participation
o Sometimes it is unknown who will participate in the program
o Make an informed guess in designing the sampling for the baseline survey.
o Types of observation units with characteristics making them more likely to
participate will often have to be over-sampled
o Example: Ravallion and Chen (2005) JPubEcon Paper
- Time-invariant selection bias
o
o Example 1: returns to infrastructure
- Example 2 with illustration: poor-area development programs (Jalan and Ravallion,
1998 JPubEcon Paper) show that poor-area development projects in rural China have
been targeted to areas with poor infrastructure and that these same characteristics
resulted in lower growth rates.

o The upshot of these observations is that controlling for initial heterogeneity is

crucial to the credibility of DD estimates.
(1) Using PSM for selecting the initial comparison group will almost certainly
reduce the bias in DD estimates (Ravallion and Chen, 2005 JPubEcon Paper).
(2) The DD method can also be combined with a discontinuity design (Jacob
and Lefgren, 2004 REconStat Paper).
Triple Difference (DDD) Estimator
- Difference between the double differences for stayers and leavers
- If baseline data unavailable, impacts may still be identified by observing participants
outcomes in the absence of the program after the program rather than before it
- identify the mean gain to participants at date 1 (TT) under two conditions:
o there is no selection bias on who leaves the program
o there are no current gains to non-participants
- A third survey round allows a joint test of these two conditions (logic: estimation of
gains to participants in period 1 independent of drop-out in period 2)
- Example: Ravallion et al. 2005 JHumanRes Paper
- If no comparison group of nonparticipants, DD estimator for stayers vs. leavers
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