February 15, 2017
Fixed Effects vs Difference-in-Differences
TL;DR: When you have longitudinal data, you should use fixed effects or ANCOVA rather than difference-in-differences since a difference-in-difference specification will spit out incorrect variance estimates. If the data is from a randomized trial, ANCOVA is probably a better bet.
Trying to understand when to use fixed effects and when to use difference-in-differences (DiD), in the past, always made me feel like an idiot. It seemed like I was missing something really obvious that everyone else was getting.
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