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I am interested in analyzing the difference in outcome(total bank deposits) among banks that were in states that implemented bail out policy and banks that were in state that did not implement bail out policy. So the intervention is, bail out policy.

  • total bank deposits (banks in state without bailout policy)
  • total bank deposits (banks in state with bailout policy)

The states that did implement bailout policy , implemented these policies starting from 1992. There were banks in these states since 1980s, prior to implementing the policy.

  • total bank deposits (banks in state prior to bailout policy)

Since my goal is to compare the effect of policy implementation on banks, which group does the bank that resided in state prior to policy implementation belong to ? Can I move these observations (total bank deposits) from banks that were in state prior to bail out policy into the group of banks that never resided in state that implemented the bail out policy ?

  • total bank deposits (banks in state without bailout policy) + total bank deposits (banks in state prior to bailout policy) ??

Curious to know if there there any pitfalls or drawbacks due to moving , total bank deposits (banks in state prior to bailout policy) to the total bank deposits (banks in state without bailout policy) category ?

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  • $\begingroup$ If some of the same banks existed before and after the bailout policy, then it seems more efficient to do a paired test Before vs After for those banks, understanding the part of any difference might be due to different economies at different times and part due to change in bailout policy. // Separately, perhaps do a two-sample test on contemporaneous banks in states with and without bailout---now understanding that some of the difference may be due to bailout policies and some due to other differences among states. $\endgroup$
    – BruceET
    Commented Nov 22, 2021 at 3:52

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Banks in treated states are always considered treated in DID. This is the case with repeated cross-sections as well as the panel version.

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  • $\begingroup$ your statement Banks in treated states are always considered treated in DID , does this imply that bank in treated states but prior to receiving treatment can be moved to control category ? $\endgroup$
    – Ahir Bhairav Orai
    Commented Nov 22, 2021 at 6:09
  • $\begingroup$ No, they are always labeled as treated, so cannot be moved to control. $\endgroup$
    – dimitriy
    Commented Nov 22, 2021 at 6:28
  • $\begingroup$ but some banks in the treatment category did not received treatment until 1992. $\endgroup$
    – Ahir Bhairav Orai
    Commented Nov 22, 2021 at 6:53
  • $\begingroup$ DID calculates the change for ever-treated banks over time minus the change for never-treated banks over time. If you move the treated state banks to the untreated group in the pre-treatment period, you will have no way to calculate that first difference. $\endgroup$
    – dimitriy
    Commented Nov 22, 2021 at 7:29
  • $\begingroup$ This removes any preexisting differences between the two types of banks that do not change over time, isolating the bailout effect. $\endgroup$
    – dimitriy
    Commented Nov 22, 2021 at 7:34

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