Session 11: Before the session

What would have happened otherwise?

Thierry Warin, PhD

HEC Montréal

Outline · Before class

  1. What to do, and how long it takes
  2. Read the paper
  3. Get BOTH datasets
  4. The course data
  5. Self-check, and what the session will ask of you
  6. Before you run anything

What session 11 is for

The mathematics

  • Set up a difference-in-differences design and identify the four cells
  • Read the interaction coefficient as the estimate
  • State the parallel-trends assumption and how you would probe it
  • Say what an instrument must satisfy, and why good ones are rare

The Python

  • Build the four cells, then get the same number from an interaction in smf.ols
  • Plot an event study and let the pre-period speak for the design
  • Handle staggered adoption without letting the cohorts blur

The international business

  • Evaluate a policy that arrived in different countries at different times
  • Defend parallel trends as an argument, not as a test that passed
  • Say plainly what the design cannot rescue

Before the session

What would have happened otherwise?

What to do, and how long it takes

1 Read the paper 45–60 min
2 Get both datasets — the paper’s, and your own angle 10 min
3 Attempt the self-check 15 min

The lecture assumes all three are done. The practice assumes the data is already cached on your machine.

1 · Read the paper

Cavallo, Gopinath, Neiman & Tang (2021), Tariff Passthrough at the Border and at the Store: Evidence from US Trade Policy, American Economic Review: Insights 3(1)

Read the article

Read for the argument, not for coverage. Annotate four things:

1 The research question, in one sentence
2 The method or design, and why they chose it
3 The strongest single piece of evidence
4 One limitation you would raise as a referee

2 · Get BOTH datasets

The practice uses two: the paper’s data, to reproduce one of its results, and your own angle, to apply the method. Have both before you arrive.

a) The paper’s replication package — Harvard Dataverse

10.7910/DVN/JV7FCH

Download it from the terminal — no Dataverse account, no browser. From the repository root:

macOS and Linux

mkdir -p 11-causal-inference-did/data/replication && cd 11-causal-inference-did/data/replication
curl -L -o replication.zip \
  "https://dataverse.harvard.edu/api/access/dataset/:persistentId/?persistentId=doi:10.7910/DVN/JV7FCH"
unzip -q replication.zip && rm replication.zip && cd -

Windows PowerShell

mkdir 11-causal-inference-did/data/replication; cd 11-causal-inference-did/data/replication
curl.exe -L -o replication.zip `
  "https://dataverse.harvard.edu/api/access/dataset/:persistentId/?persistentId=doi:10.7910/DVN/JV7FCH"
Expand-Archive replication.zip .; Remove-Item replication.zip; cd -

data/replication/ is git-ignored, so nothing large is committed. Keep the authors’ own structure — do not tidy it.

This deposit sits behind a Dataverse guestbook, so the curl recipe above returns an error for this session. Open the DOI in a browser, click Access Dataset -> Download ZIP, accept the terms once, and unzip it to the same folder. Everything after that is identical.

2b · The course data

import qmib

core = qmib.load("core")                # the spine, shared by every group
mine = qmib.load("angle_c_country")     # REPLACE with your own angle

print(core.shape, mine.shape)

Run this before you arrive. It downloads once and caches as parquet, so the practice works whatever the room’s wifi is doing.

angle_c_country is an example, not your angle. Yours is named in RESEARCH-MANDATES.md.

The spine’s post-2021 structural break, treated as a policy change · everything available: qmib.catalog()

3 · Self-check, and what the session will ask of you

Answer these on paper. If you cannot, that is what the lecture is for.

  1. In one sentence: what does this session’s method let you claim that the previous one did not?
  2. What must be true of your data for it to apply?
  3. Which claim in the paper rests on this method — and how hard does it lean on it?

By the end of the session you should be able to:

  • Set up a difference-in-differences design and identify the four cells
  • Read the interaction coefficient as the estimate
  • State the parallel-trends assumption and how you would probe it
  • Explain what an instrument must satisfy, and why good ones are rare
  • Say what neither design can rescue

Arrive with: the paper read and annotated · the replication package unzipped · qmib.load() run at least once · your self-check answers on paper.

Before you run anything

Everything runs in the VS Codium terminal, from the repository root, with the project environment active. Activate it in every new terminal, not only the first:

source .venv/bin/activate        # macOS and Linux
.venv\Scripts\activate           # Windows (PowerShell)

Your prompt must begin with (.venv). Without it python and pip are your system’s, and nothing the course installed is visible to them.

ModuleNotFoundError means the packages went somewhere else, or were never installed. Check the prompt first, then pip install -r requirements.txt — from the repository root, with the environment active. Building the environment from scratch is Session 01, step 1.4.

Session 11: README.md · the lecture: 01-lecture/