Universität Bonn

Department of Economics

Clément de Chaisemartin - University of California at Santa Barbara

"Difference-in-Differences for Continuous Treatments and Instruments with Stayers"

Abstract

We propose difference-in-differences estimators for continuous treatments with heterogeneous effects. We assume that between consecutive periods, the treatment of some units, the switchers, changes, while the treatment of other units does not change. We show that under a parallel trends assumption, an unweighted and a weighted average of the slopes of switchers' potential outcomes can be estimated. While the former parameter may be more intuitive, the latter can be used for cost-benefit analysis, and it can often be estimated more precisely. We generalize our estimators to the instrumental-variable case. We use our results to estimate the price-elasticity of gasoline consumption.

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