The following picture is taken from a study adopting the difference-in- differences method. Explain the main idea of the method and the assump- tions needed to apply the method. 2) Please describe the picture, how to interpret it and its main message. 3) Is the graph supportive of a causal relationship between the concepts studied?

784 THE AMERICAN ECONOMIC REVIEW SEPTEMBE 0.8 0.6 Proportion with Positive Earnings 0.4 0.2 O -6 -4 -2 0 2 6 Year Relative to Winning FIGURE 2. PROPORTION WITH POSITIVE EARNINGS FOR NONWINNERS, WINNERS, AND BIG WINNERS Note: Solid line = nonwinners; dashed line = winners; dotted line = big winners. Source: Imbens et al (2001), p. 784