A Primer for Applying Propensity-Score Matching
AbstractThe use of microeconometric techniques to estimate the effects of development policies has become a common approach not only for scholars, but also for policy-makers engaged in designing, implementing and evaluating projects in different fields. Among these techniques, Propensity-Score Matching (PSM) is increasingly applied in the policy evaluation community. This technical note provides a guide to the key aspects of implementing PSM methodology for an audience of practitioners interested in understanding its applicability to specific evaluation problems. The note summarizes the basic conditions under which PSM can be used to estimate the impact of a program and the data required. It explains how the Conditional Independence Assumption, combined with the Overlap Condition, reduces selection bias when participation in a program is determined by observable characteristics. It also describes different matching algorithms and some tests to assess the quality of the matching. Case studies are used throughout to illustrate important concepts in impact evaluation and PSM. In the annexes, the note provides an outline of the main technical aspects and a list of statistical and econometric software for implementing PSM.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Office of Strategic Planning and Development Effectiveness (SPD) in its series SPD Working Papers with number 1005.
Date of creation: Aug 2010
Date of revision:
Policy Evaluation; Microeconometrics; Propensity-Score Matching; Average Treatment Effect on the Treated; Development Effectiveness;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O22 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
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