The difference-in-differences approach relaxes some of the required assumptions for establishing causality by leveraging what dimension of the empirical setting?
A) Observing repeated observations of the same cross-sectional units over time.
B) Observing multiple cross-sectional units receiving the treatment.
C) Observing a time series for one series.
D) Being able to construct an instrument from the first stage difference.

Question

Quizplus · Accepted Answer

The difference-in-differences approach leverages the dimension of observing repeated observations of the same cross-sectional units over time. By comparing changes in the outcome variable over time for the treatment group and a comparison group, the approach estimates the causal effect of the treatment. This approach relaxes some of the required assumptions for establishing causality, such as assuming that the treatment and comparison groups are similar in all respects, by relying on the assumption that trends in the outcome variable would have been similar for the two groups in the absence of the treatment.

The Difference-In-Differences Approach Relaxes Some of the Required Assumptions for Establishing