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Propensity Score Methods for Causal Inference: On the Relative Importance of Covariate Selection, Reliable Measurement, and Choice of Propensity Score Technique

  • Peter M. Steiner

    ()

    (University of Wisconsin–Madison)

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    The popularity of propensity score (PS) methods for estimating causal treatment effects from observational studies has increased during the past decades. However, the success of these methods in removing selection bias mainly rests on strong assumptions, like the strong ignorability assumption, and the competent implementation of a specific propensity score technique. After giving a brief introduction to the Rubin Causal Model and different types of propensity score techniques, the paper assess the relative importance of three factors in removing selection bias in practice: (i) The availability of covariates that are related to both the selection process and the outcome under investigation; (ii) The reliability of the covariates’ measurements; And (iii) the choice of a specific analytic method for estimating the treatment effect—either a specific propensity score technique (PS matching, PS stratification, inverse-propensity weighting, and PS regression adjustment) or standard regression approaches. The importance of these three factors is investigated by reviewing different within-study comparisons and meta-analyses. Within-study comparisons enable an empirical assessment of PS methods’ performance in removing selection bias since they contrast the estimated treatment effect from an observational study with an estimate from a corresponding randomized experiment. The empirical evidence indicates that the selection of covariates counts most in reducing selection bias, their reliable measurement next most, and the mode of data analysis—either a specific propensity score technique or standard regression—is of least importance. Additional evidence suggests that the crucial strong ignorability assumption is most likely met if pretest measures of the outcome or constructs that directly determine the selection process are available and reliably measured.

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    File URL: http://www2.almalaurea.it/universita/pubblicazioni/wp/pdf/wp09.pdf
    File Function: First version, 2011
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    Paper provided by AlmaLaurea Inter-University Consortium in its series Working Papers with number 09.

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    Length: 18
    Date of creation: Sep 2011
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    Handle: RePEc:laa:wpaper:09
    Contact details of provider: Web page: http://www.almalaurea.it

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    1. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
    2. Juan Jose Diaz & Sudhanshu Handa, 2006. "An Assessment of Propensity Score Matching as a Nonexperimental Impact Estimator: Evidence from Mexico’s PROGRESA Program," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    4. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
    5. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    6. Shadish, William R. & Clark, M. H. & Steiner, Peter M., 2008. "Can Nonrandomized Experiments Yield Accurate Answers? A Randomized Experiment Comparing Random and Nonrandom Assignments," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1334-1344.
    7. Thomas D. Cook & William R. Shadish & Vivian C. Wong, 2008. "Three conditions under which experiments and observational studies produce comparable causal estimates: New findings from within-study comparisons," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 724-750.
    8. Heller, Ruth & Rosenbaum, Paul R. & Small, Dylan S., 2009. "Split Samples and Design Sensitivity in Observational Studies," Journal of the American Statistical Association, American Statistical Association, vol. 104(487), pages 1090-1101.
    9. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
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