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Economic Applications
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Topics
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1. Notation
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Assumptions
I. Unconfoundedness
Y (0), Y (1) ⊥ W | X.
then
Yi = α + τ · Wi + β Xi + εi,
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III. Unconfoundedness follows from some economic models.
Wi = argmaxw E[Yi(w)|Xi ] − ci · w.
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Identification
Then
τ = E[τ (X)].
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Questions
How do we estimate τ ?
How do we do inference?
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2. Estimation of Average Treatment Effect under Un-
confoundedness
III. Matching: match all units to units with similar values for
covariates and opposite treatment.
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Regression Estimators
N
1
τ̂ = (μ̂1(Xi) − μ̂0(Xi)).
N i=1
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Propensity Score Estimators
Y (0), Y (1) ⊥ W | X.
then
N
1 W i · Yi (1 − Wi) · Yi
τ̂ = − .
N i=1 ê(Xi ) 1 − ê(Xi)
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Matching
sm 1
τ̂ = Ŷi(1) − Ŷi(0) .
N i=1
More generally, let JM (i) = {1(i), ..., M (i)} be the set of in-
dices for the nearest M matches for unit i.
Define:
Yi if Wi = 1,
Ŷi(1) =
j∈JM (i) Yj /M if Wi = 0,
Yi if Wi = 0,
Ŷi(0) =
j∈JM (i) Yj /M if Wi = 1.
Yi if Wi = 0,
Ỹi(0) =
Y(i) + μ̂0(Xi ) − μ̂0(Xj(i) ) if Wi = 1
1 N
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Variance Estimation
N
τ̂ = Wi · λi · Yi − (1 − Wi) · λi · Yi ,
i=1
λi = λ(W, X).
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Variance conditional on W and X is
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V (τ̂ |W, X) = 2 2 2 2
Wi · λi · σ1 (Xi) + (1 − Wi) · λi · σ0 (Xi) .
i=1
2 (X ) = 1
σ
W
i i (Yi − Yh(i) )2.
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Even though σ̂w2 (x) is not consistent, the estimator for V (τ̂ |W, X)
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N
τ (A) = 1{Xi ∈ A} · τ (Xi)/ 1{Xi ∈ A}.
i=1 i=1
Syntax:
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nnmatch depvar treatvar varlist [weight] [if exp] [in range]
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option 1
tc({ate|att|atc})
One can est. the overall average effect of the treatment (ate),
or the average treatment effect for the treated units (att), or
the average effect for those who were not treated (atc)
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option 2
m(#)
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option 3
metric(maha|matname )
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option 4
exact(varlistex )
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option 5
biasadj(bias|varlistadj )
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option 6 robusth(#)
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option 7
population
N
1
(μ1(Xi) − μ0(Xi)) ,
N i=1
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option 8
level(#)
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option 9
keep(filename) replace
Allows the user to recover output beyond the estimate and its
standard error.
A new data set is created with one observation per match, and
covariate information is kept for control and treated unit in
each match.
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Examples
nnmatch re78 t age educ black hisp married re74 re75 u74 u75,
tc(att)
nnmatch re78 t age educ black hisp married re74 re75 u74 u75,
tc(att) m(4) exact(reo75) bias(bias) rob(4) keep(lalonde temp1)
replace
nnmatch re78 t age educ black hisp married re74 re75 u74 u75,
tc(att) m(4) exact(pscore) bias(bias) rob(4) keep(lalonde temp2)
replace
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5. Illustration with Lalonde Data, CPS Control Group:
Summary Statistics
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Estimation of Propensity Score
logit t age educ black hisp married re74 re75 reo74 reo75
predict pscore
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Checking Plausability of Unconfoundedness
nnmatch re75 t age educ black hisp married re74 u74, tc(att)
m(4) bias(bias) rob(4)
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Selecting Sample
keep if (pscore>0.1)&(pscore<0.9)
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Checking Plausability of Unconfoundedness in Selected
Sample
nnmatch re75 t age educ black hisp married re74 u74, tc(att)
m(4) bias(bias) rob(4)
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Final Estimates
nnmatch re78 t age educ black hisp married re74 re75 u74 u75,
tc(att) m(4) bias(bias) rob(4)
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Cautionary note:
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