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Group-Average Observables as Controls for Sorting on Unobservables When Estimating Group Treatment Effects: the Case of School and Neighborhood Effects

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  • Joseph G. Altonji
  • Richard K. Mansfield

Abstract

We consider the classic problem of estimating group treatment effects when individuals sort based on observed and unobserved characteristics that affect the outcome. Using a standard choice model, we show that controlling for group averages of observed individual characteristics potentially absorbs all the across-group variation in unobservable individual characteristics. We use this insight to bound the treatment effect variance of school systems and associated neighborhoods for various outcomes. Across four datasets, our most conservative estimates indicate that a 90th versus 10th percentile school system increases the high school graduation probability by between 0.047 and 0.085 and increases the college enrollment probability by between 0.11 and 0.13. We also find large effects on adult earnings. We discuss a number of other applications of our methodology, including measurement of teacher value-added.

Suggested Citation

  • Joseph G. Altonji & Richard K. Mansfield, 2014. "Group-Average Observables as Controls for Sorting on Unobservables When Estimating Group Treatment Effects: the Case of School and Neighborhood Effects," NBER Working Papers 20781, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20781 Note: CH ED LS
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    File URL: http://www.nber.org/papers/w20781.pdf
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    References listed on IDEAS

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    1. Jesse Rothstein, 2009. "Student Sorting and Bias in Value-Added Estimation: Selection on Observables and Unobservables," Education Finance and Policy, MIT Press, vol. 4(4), pages 537-571, October.
    2. Dionissi Aliprantis, 2011. "Assessing the evidence on neighborhood effects from moving to opportunity," Working Paper 1101, Federal Reserve Bank of Cleveland.
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    Cited by:

    1. David Pence Slichter, 2015. "The Employment Effects of the Minimum Wage: A Selection Ratio Approach to Measuring Treatment Effects," 2015 Papers psl76, Job Market Papers.
    2. Bryan S. Graham, 2016. "Identifying and Estimating Neighborhood Effects," NBER Working Papers 22575, National Bureau of Economic Research, Inc.
    3. Cook, Jason B. & Mansfield, Richard K., 2016. "Task-specific experience and task-specific talent: Decomposing the productivity of high school teachers," Journal of Public Economics, Elsevier, vol. 140(C), pages 51-72.
    4. Scott E. Carrell & Michal Kurlaender, 2018. "Estimating the Productivity of Community Colleges in Paving the Road to Four-Year College Success," NBER Chapters,in: Productivity in Higher Education National Bureau of Economic Research, Inc.
    5. Scott E. Carrell & Michal Kurlaender, 2016. "Estimating the Productivity of Community Colleges in Paving the Road to Four-Year Success," NBER Working Papers 22904, National Bureau of Economic Research, Inc.
    6. Jo Blanden & Kirstine Hansen & Sandra McNally, 2017. "Quality in Early Years Settings and Children’s School Achievement," CEP Discussion Papers dp1468, Centre for Economic Performance, LSE.
    7. Jonathan Smith & Kevin Stange, 2016. "A New Measure of College Quality to Study the Effects of College Sector and Peers on Degree Attainment," Education Finance and Policy, MIT Press, vol. 11(4), pages 369-403, Fall.
    8. Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2018. "Learning and Earning: An Approximation to College Value Added in Two Dimensions," NBER Chapters,in: Productivity in Higher Education National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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