Suppose we are studying the effects of expanded income supplement for senior citizens on their health. We use the two-group, to-period differences-in-differences setup, with working-age citizens as our control group. Which of the following is a key assumption for the validity of this identification strategy?
A)In the absence of the intervention, the average health outcomes would be the same for both groups.
B)Before the intervention, the average health outcomes were the same for both groups.
C)After the intervention, the average health trends would be the same for both groups.
D)In the absence of the intervention, the average health trends would be the same for both groups.

Question

Quizplus · Accepted Answer

The key assumption for the validity of the differences-in-differences (DiD) identification strategy is that, in the absence of the intervention, the average health trends (not necessarily the levels) would be the same for both the treatment and control groups. This assumption ensures that any difference in the post-intervention trends between the two groups can be attributed to the intervention itself, rather than to pre-existing differences in trends.

Suppose We Are Studying the Effects of Expanded Income Supplement