What is the difference model in difference?

DID model is often used to study the effect of policy evaluation, such as studying the equivalence of "encouraging listing policy", "opening Shanghai-Hong Kong Stock Connect", "opening high-speed rail" and "introducing new education model", and analyzing the impact of the effect.

The difference model in difference is mainly used to evaluate the policy effect in sociology. Its principle is based on a counterfactual framework to evaluate the changes of factor Y observed with and without policies.

Double difference model note:

If an exogenous policy shock divides the sample into two groups-the treatment group with policy intervention and the control group without policy intervention, and there is no significant difference in Y between the treatment group and the control group before the policy shock, then we can regard the change of Y in the control group before and after the policy shock as the situation of the treatment group without policy shock (counterfactual result).

By comparing the changes of Y (D 1) in the treatment group and Y (D2) in the control group, we can get the actual effect of policy shock (DD=D 1-D2).