Refining the Notion of No Anticipation in Difference-in-Differences Studies
Abstract
We clarify the interpretation of identification strategies using difference-in-differences (DiD), which are widely applied in empirical research. In particular, DiD researchers often invoke an assumption commonly referred to as the “no-anticipation assumption”. Taken literally, this assumption states that treatments in the future have no effect on outcomes in the past. Because standard causal models rely on a temporal structure in which causes precede effects, such an assumption seems to be inherently satisfied. However, most researchers attribute a different meaning to the assumption: they interpret the assumption as ensuring no effect of policy decision, e.g., immediate behavioral changes due to knowledge about the plan to implement the policy. We discuss the consequences of this mismatch, and give an alternative formulation of no anticipation that captures DiD researchers’ concerns and clarifies identification arguments.