Broken or Fixed Effects?
We replicate eight influential papers to provide empirical evidence that, in the presence of heterogeneous treatment effects, OLS with fixed effects (FE) is generally not a consistent estimator of the average treatment effect (ATE). We propose two alternative estimators that recover the ATE in the presence of group-specific heterogeneity. We document that heterogeneous treatment effects are common and the ATE is often statistically and economically different from the FE estimate. In all but one of our replications, there is statistically significant treatment effect heterogeneity and, in six, the ATEs are either economically or statistically different from the FE estimates.
We are grateful for comments from Michael Anderson, Alan Auerbach, Rodney Andrews, Joshua Angrist, Mar- ianne Bitler, Henning Bohn, Moshe Buchinsky, Federico Bugni, Colin Cameron, Carlos Dobkin, Shakeeb Khan, Maximilian Kasy, Patrick Kline, Yolanda Kodrzycki, Trevon Logan, Fernando Lozano, Matt Masten, Arnaud Mau- rel, Doug Miller, Juan Carlos Montoy, Enrico Moretti, Ron Oaxaca, Steve Raphael, Adam Rosen, Jesse Shapiro, Jasjeet Sekhon, Todd Sorensen, Doug Steigerwald, Rocio Titiunik, and Philippe Wingender and for the comments and suggestions of seminar participants at UC Berkeley, the 2008 AEA Pipeline Conference at UCSB, and the 2009 All UC Labor Conference. We also thank Stephen Lagos and Andrew Stanek for research assistance. Any remaining errors are the fault of the authors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Gibbons Charles E. & Suárez Serrato Juan Carlos & Urbancic Michael B., 2019. "Broken or Fixed Effects?," Journal of Econometric Methods, De Gruyter, vol. 8(1), pages 1-12, January. citation courtesy of