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The procedure allows the covariates to be affected by treatment and enables separation of the part of the estimated treatment effect that is due to the covariates from the part that is not. The asymptotic properties of the new approach are established, and their accuracy in small samples is investigated using Monte Carlo simulations. The procedure is illustrated using as an example the effect of increased trade competition on firm markups in China. We estimate that about half of the impact of China's entrance into the WTO on markup dispersion came from the changes in industry\u2010level productivity.<\/jats:p>","DOI":"10.1002\/jae.70055","type":"journal-article","created":{"date-parts":[[2026,4,22]],"date-time":"2026-04-22T11:27:15Z","timestamp":1776857235000},"page":"567-579","update-policy":"https:\/\/doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":0,"title":["Direct and Indirect Treatment Effects With Time\u2010Varying Covariates"],"prefix":"10.1002","volume":"41","author":[{"given":"Nicholas L.","family":"Brown","sequence":"first","affiliation":[{"name":"Department of Economics Florida State University  Tallahassee FL USA"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Kyle","family":"Butts","sequence":"additional","affiliation":[{"name":"Department of Economics University of Arkansas  Fayetteville AR USA"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Joakim","family":"Westerlund","sequence":"additional","affiliation":[{"name":"Department of Economics Lund University  Lund Sweden"},{"name":"Department of Economics Deakin University  Geelong Australia"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2026,4,22]]},"reference":[{"key":"e_1_2_12_2_1","doi-asserted-by":"publisher","DOI":"10.1111\/0034-6527.00321"},{"key":"e_1_2_12_3_1","unstructured":"Aklin M. andP.Bayer.2017. \u201cHow Can We Estimate the Effectiveness of Institutions? 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