In my difference in differences model firms $> x$ belong to the treatment group whereas firms$< x$ act as control.
I have a two period model:
- In $t_1$ firm $i$ is $> x$ and thus belongs to the treatment group
- In $t_2$ the same firm $i$ is $< x$ and belongs to the control group
Do you have any recommendations how to deal with this problem?
The treatment is a change in a law that only affects firms with more than $x$ employees. Firms smaller than $x$ are not affected by this law. However, a firm that is $<x$ in $t_1$ can certainly exceed the threshold in $t_2$. In this case it will be affected by the law change in $t_2$