AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
When Should Pre-trends Be Parallel?
AEA Papers and Proceedings
(pp. 64–69)
Abstract
We analyze pre-trends tests through the lens of how units select into treatment. We derive necessary and sufficient conditions for pre-trends and trends to be parallel with and without covariates. These conditions show that even in the absence of structural breaks, pre-trends tests can be uninformative about parallel trends, except under specific restrictions on selection. Thus, correctly interpreting pre-trends tests requires an understanding of the units’ selection behavior, and pre-trends tests cannot replace economic arguments for parallel trends. We document additional issues with pre-trends tests when researchers control for pre-treatment values of time-varying covariates.Citation
Ghanem, Dalia, Pedro H. C. Sant’Anna, and Kaspar Wüthrich. 2026. "When Should Pre-trends Be Parallel?" AEA Papers and Proceedings 116: 64–69. DOI: 10.1257/pandp.20261109Additional Materials
JEL Classification
- C21 Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
- C23 Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models