Bounds for Treatment Effects in the Presence of Anticipatory Behavior

Abstract: In program evaluations, units can often anticipate the implementation of a new policy before it occurs. Such anticipatory behavior can lead to units' outcomes becoming dependent on their future treatment assignments. In this paper, I employ a potential-outcomes framework to analyze the treatment effect with anticipation. I start with a classical difference-in-differences model with two time periods and provide identified sets with easy-to-implement estimation and inference strategies for causal parameters. Empirical applications and generalizations are provided. I illustrate my results by analyzing the effect of an early retirement incentive program for teachers, which the target units were likely to anticipate, on student achievement. The empirical results show the result can be overestimated by up to 30\% in the worst case and demonstrate the potential pitfalls of failing to consider anticipation in policy evaluation.