Panel treatment effects measurement: Factor or linear projection modelling?

Document Type

Article

Publication Date

11-1-2024

Abstract

We discuss methods of measuring the treatment effects of a unit through the use of other units in panel data by either the factor-based (FB) approach or the linear projection (LP) approach under different sample configurations of cross-sectional dimension (Formula presented.) and time series dimension (Formula presented.). We show that the LP approach in general yields smaller mean square prediction error than the FB approach when either both (Formula presented.) and (Formula presented.) are large or (Formula presented.) fixed and (Formula presented.) or (Formula presented.) fixed and (Formula presented.) large. The Monte Carlo simulation and empirical example are also conducted to consider their finite sample performances.

Publication Source (Journal or Book title)

Journal of Applied Econometrics

First Page

1332

Last Page

1358

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