6.2 Set up

For example, you observe units A and B in periods 1 and 2. Unit A is treated in period 2, whereas unit B does not receive treatment. The variation in treatment between periods 1 and 2 is the within variation in treatment. The comparison in treatment across units A and B is the across variation.

Goal. We would want to compare the difference in average outcomes between two periods for unit A with the difference in average outcomes between the two periods pertaining to unit B.