Comprehensive and continuous Impact evaluations are a crucial tool for generating accountability and learning. At both a national and international level, they are crucial to knowledge building and assessing the effectiveness of development programs.
By informing stakeholders of the aspects of a program that need to be restructured, time and resources can then be directed down a profitable route. The difference-in-differences method is a popular Impact analysis approach used for measuring the impact of an intervention on groups of people.
Applied when the program assignment rules are more ambiguous, it requires stronger assumptions than randomized assignments.
An Explanation of How the Method Can be Applied Indicates that it Operates much as its Name Suggests
The difference-in-differences method compares the changes in outcome over time between a group of people enrolled in a program (i.e. the treatment group) and a group that is not enrolled in a program (i.e. the control or comparison group). It then proceeds to measure the differences.
The First Difference: The treatment Group
The method takes into account the before and after differences in the treatment group’s outcomes. It compares the same group to itself, so as to evaluate the factors that are constant over time in the treatment group.
The Second Difference: Time-Varying Factors
The method then evaluates the before and after differences in the control or comparison group- which was exposed to similar conditions as the treatment group. This is done to compare the results to the treatment group.
The Third Difference: Clearing Time- Varying Factors
Finally, the method clears all the time-varying factors from the first difference by subtracting the second difference from it. This leaves us an estimation of the intervention – or the difference-in-differences.
A Formulaic Expression may Simplify Understanding of the method
- Calculate the before-after difference in the outcome for the treatment group (B-A).
- Calculate the before-after difference in the outcome for the comparison group (D-C)
- Calculate the difference between the difference in outcomes for the treatment group (B-A) and the difference for the comparison group (D-C). This is the difference-in-differences: (DD)=(B-A)-(D-C).
The basic assumption that the difference-in-differences method operates on, is that the changes in the treatment group occurred due to the intervention. In the absence of this, it would have led to the same results as the control group. Hence, it does exactly what its name suggests: It combines before and after comparisons and comparisons between those enrolled and not enrolled in the group to produce an estimate of the results.
Therefore, while it is a useful tool for impact evaluation, certain factors to remember for its application are:
- The control group has to be well-defined.
- The assumption was that the trends in the treatment and control group would have been the same in the absence of treatment.
Nevertheless, it remains a powerful data analysis tool and a welcome addition to an impact practitioner’s toolkit.
Works Cited
- Difference-in differences. The World Bank. https://dimewiki.worldbank.org/Difference-in-Differences
- Impact Evaluation in Practice. Second Edition. World Bank Group.
- Difference-in Differences Methods. Columbia Public Health. https://www.publichealth.columbia.edu/research/population-health-methods/difference-difference-estimation
