4.3.2. Two-Period DID

The regression coefficients in the baseline regression may be overestimated due to sequential correlation issues. To solve this problem, we will adopt a two-period estimation strategy according to Bertrand et al. (2004) [29]. The data will be divided into two periods based on the point in time of the policy. That is, the variables in the two periods are averaged to construct a two-period DID sample.

The estimation result is shown in column (2) of Table 4. We find that the coefficient on Treat\*Post is significantly negative at the 1% level, suggesting that the city cluster policy can reduce city carbon emissions even after considering potential serial correlation issues.
