NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Hannah Druckenmiller

Department of Agriculture and Resource Economics
University of California, Berkeley
207 Giannini Hall
Berkeley, CA 94720
USA

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of California at Berkeley

NBER Working Papers and Publications

October 2018Accounting for Unobservable Heterogeneity in Cross Section Using Spatial First Differences
with Solomon Hsiang: w25177
We develop a simple cross-sectional research design to identify causal effects that is robust to unobservable heterogeneity. When many observational units are dense in physical space, it may be sufficient to regress the “spatial first differences” (SFD) of the outcome on the treatment and omit all covariates. This approach is conceptually similar to first differencing approaches in time-series or panel models, except the index for time is replaced with an index for locations in space. The SFD design identifies plausibly causal effects, even when no instruments are available, so long as local changes in the treatment and unobservable confounders are not systematically correlated between immediately adjacent neighbors. We demonstrate the SFD approach by recovering new cross-sectional estimat...
 
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