Check the location-level / shock-level equivalence

Verifies numerically that the location-level shift-share IV estimate equals the shock-level IV estimate (Borusyak-Hull-Jaravel 2022). A near-zero difference is a strong internal-consistency check that the instrument and aggregation are behaving as intended. Equality is exact on the shift route, where the location-level regression carries the BHJ controls that translate into the shock-level constant and period fixed effects (the sum of exposure shares, interacted with period FE in panels) automatically; it is a shift-route diagnostic and is run there by [ssb_pipeline()].

Usage

ssb_equivalence(design)

Arguments

design

An [ssb_design()] object.

Value

A list (class `ssb_equivalence`) with `location`, `shock`, and their absolute `difference`.

Examples

sim <- ssb_simulate(n_loc = 80, n_sec = 10, seed = 1)
d <- ssb_design(sim$data, sim$shares, sim$shocks, exogenous = "shift")
ssb_equivalence(d)
#> <ssBartik equivalence check>
#>   location-level SSIV : 1.446813
#>   shock-level IV      : 1.446813
#>   |difference|        : 2.22e-16  (match)