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A Covariate Selection Criterion for Estimation of Treatment Effects

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  • Xun Lu

Abstract

We study how to select or combine estimators of the average treatment effect (ATE) and the average treatment effect on the treated (ATT) in the presence of multiple sets of covariates. We consider two cases: (1) all sets of covariates satisfy the unconfoundedness assumption and (2) some sets of covariates violate the unconfoundedness assumption locally. For both cases, we propose a data-driven covariate selection criterion (CSC) to minimize the asymptotic mean squared errors (AMSEs). Based on our CSC, we propose new average estimators of ATE and ATT, which include the selected estimators based on a single set of covariates as a special case. We derive the asymptotic distributions of our new estimators and propose how to construct valid confidence intervals. Our Monte Carlo simulations show that in finite samples, our new average estimators achieve substantial efficiency gains over the estimators based on a single set of covariates. We apply our new estimators to study the impact of inherited control on firm performance.

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  • Xun Lu, 2015. "A Covariate Selection Criterion for Estimation of Treatment Effects," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(4), pages 506-522, October.
    • Handle: RePEc:taf:jnlbes:v:33:y:2015:i:4:p:506-522
    DOI: 10.1080/07350015.2014.982755
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