September 15, 2020

Constructing a More Closely Matched Control Group in a Difference-in-Differences Analysis: Its Effect on History Interacting with Group Bias

By Pallavi Basu and Dylan Small


Difference-in-differences analysis with a control group that differs considerably from a treated group is vulnerable to bias from historical events that have different effects on the groups. Constructing a more closely matched control group by matching a subset of the overall control group to the treated group may result in less bias. We study this phenomenon in  simulation studies. We study the effect of mountaintop removal mining (MRM) on mortality using a difference-in-differences analysis that makes use of the increase in MRM following the 1990 Clean Air Act Amendments. For a difference-in-differences analysis of the effect of MRM on mortality, we constructed a more closely matched control group and found a 95% confidence interval that contains substantial adverse effects along with no effect and small beneficial effects.

Applications and Case Studies Methodology