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http://ssrn.com/abstract=937912
 
 

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Moving the Goalposts: Addressing Limited Overlap in Estimation of Average Treatment Effects by Changing the Estimand


Richard K. Crump


Federal Reserve Banks - Federal Reserve Bank of New York

V. Joseph Hotz


Duke University; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Guido W. Imbens


Stanford Graduate School of Business

Oscar A. Mitnik


Federal Deposit Insurance Corporation; Institute for the Study of Labor (IZA)

September 2006

IZA Discussion Paper No. 2347

Abstract:     
Estimation of average treatment effects under unconfoundedness or exogenous treatment assignment is often hampered by lack of overlap in the covariate distributions. This lack of overlap can lead to imprecise estimates and can make commonly used estimators sensitive to the choice of specification. In such cases researchers have often used informal methods for trimming the sample. In this paper we develop a systematic approach to addressing such lack of overlap. We characterize optimal subsamples for which the average treatment effect can be estimated most precisely, as well as optimally weighted average treatment effects. Under some conditions the optimal selection rules depend solely on the propensity score. For a wide range of distributions a good approximation to the optimal rule is provided by the simple selection rule to drop all units with estimated propensity scores outside the range [0.1, 0.9].

Number of Pages in PDF File: 49

Keywords: average treatment effects, causality, unconfoundedness, overlap, treatment effect heterogeneity

JEL Classification: C14, C21, C52

working papers series


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Date posted: November 1, 2006  

Suggested Citation

Crump, Richard K. and Hotz, V. Joseph and Imbens, Guido W. and Mitnik, Oscar A., Moving the Goalposts: Addressing Limited Overlap in Estimation of Average Treatment Effects by Changing the Estimand (September 2006). IZA Discussion Paper No. 2347. Available at SSRN: http://ssrn.com/abstract=937912

Contact Information

Richard K. Crump (Contact Author)
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
V. Joseph Hotz
Duke University ( email )
Durham, NC 27708
United States
919-660-1841 (Phone)
919-684-8974 (Fax)
HOME PAGE: http://www.econ.duke.edu/~vjh3
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany

Guido W. Imbens
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

Oscar A. Mitnik
Federal Deposit Insurance Corporation ( email )
Center for Financial Research
550 17th Street, NW
Washington, DC 20429
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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