Explain the concept of 'Parallel Trends Assumption' in Difference-in-Differences studies.
Instruction: Discuss the importance of the Parallel Trends Assumption and how to test for its validity.
Context: This question assesses the candidate's knowledge of key assumptions in DiD methodology and their ability to validate these assumptions.
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Parallel trends means that, without treatment, the treated and comparison groups would have had the same average change in outcome over the relevant period. Their levels do not have to be equal...