TY  - RPRT
        AU  - Puhani, Patrick A.
        TI  - The Treatment Effect, the Cross Difference, and the Interaction Term in Nonlinear “Difference-in-Differences” Models
        PY  - 2008/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 3478
        UR  - https://www.iza.org/publications/dp3478
        AB  - I demonstrate that Ai and Norton’s (2003) point about cross differences is not relevant for the estimation of the treatment effect in nonlinear “difference-in-differences” models such as probit, logit or tobit, because the cross difference is not equal to the treatment effect, which is the parameter of interest. In a nonlinear “difference-in-differences” model, the treatment effect is the cross difference of the conditional expectation of the observed outcome minus the cross difference of the conditional expectation of the potential outcome without treatment. Unlike in the linear model, the latter cross difference is not zero in the nonlinear model. It follows that the sign of the treatment effect in a nonlinear “difference-in-differences” model with a strictly monotonic transformation function is equal to the sign of the coefficient of the interaction term of the time and treatment group indicators. The treatment effect is simply the incremental effect of the coefficient of the interaction term.
        KW  - interaction effect
KW  - probit
KW  - limited dependent variable
KW  - nonlinear models
KW  - identification
KW  - tobit
KW  - logit
KW  - difference-in-differences
        ER  -