Difference-in-Differences with Geocoded Microdata

Abstract

This paper formalizes a common approach for estimating effects of treatment at a specific location using geocoded microdata. This estimator compares units immediately next to treatment (an inner-ring) to units just slightly further away (an outer-ring). I introduce intuitive assumptions needed to identify the average treatment effect among the affected units and illustrates pitfalls that occur when these assumptions fail. Since one of these assumptions requires knowledge of exactly how far treatment effects are experienced, I propose a new method that relaxes this assumption and allows for nonparametric estimation using partitioning-based least squares developed in Cattaneo et al. (2019a,b). Since treatment effects typically decay/change over distance, this estimator improves analysis by estimating a treatment effect curve as a function of distance from treatment. This is contrast to the traditional method which, at best, identifies the average effect of treatment. To illustrate the advantages of this method, I show that Linden and Rockoff (2008) under estimate the effects of increased crime risk on home values closest to the treatment and overestimate how far the effects extend by selecting a treatment ring that is too wide.