Econometrics · intermediate
What moves on the Difference-in-Differences diagram
With parallel pre-trends, the control state reveals what would have happened anyway. The treated state's lift above that counterfactual is the difference-in-differences estimate.
Two neighbouring states track each other quarter after quarter: parallel trends.
One state raises its minimum wage; the other does not.
After the policy date, the treated state's line lifts above where its old trend was heading.
The vertical gap between the treated line and its counterfactual is the causal effect. Card and Krueger's version of this picture rewrote the minimum wage debate.
Examiners ask this as: minimum wage, card krueger, new jersey pennsylvania, policy evaluation, fast food employment.
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