Topic: “Stage-Based Identification of Policy Effects”
We develop a method that identifies the effects of nationwide policy, i.e., policy implemented across all regions at the same time. In our method, we put forward the idea of tracking outcome paths in terms of stages rather than time, where a stage of a regional outcome at time t is its location on the support of a reference path. Through a normalization that maps the time paths of regional outcomes onto a reference path—using only pre-policy data—we uncover cross-regional heterogeneity in the stage at which policy is implemented. This stage variation identifies policy effects inside a window of stages where a stage-leading region provides the no-policy counterfactual path for non-leading regions that are subject to policy inside that window. We assess our method’s performance with Monte-Carlo experiments, and illustrate it with empirical applications. Stage-Based Identification captures heterogeneous policy effects across stages and the aggregate effects of policy.
Coauthors: Christian Alemán, Alexander Ludwig, and Raül Santaeulàlia-Llopis