A Comparison of Methods to Separate Treatment from Self-Selection Effects in an Online Banking Setting

Abstract

The literature discusses several methods to control for self-selection effects but provides little guidance on which method to use in a setting with a limited number of variables. The authors theoretically compare and empirically assess the performance of different matching methods and instrumental variable and control function methods in this type of setting by investigating the effect of online banking on product usage. Hybrid matching in combination with the Gaussian kernel algorithm outperforms the other methods with respect to predictive validity. The empirical finding of large self-selection effects indicates the importance of controlling for these effects when assessing the effectiveness of marketing activities.

Keywords: Self-selection effects, Matching methods, Instrumental variables method, Control function method, Online use

JEL Classification: M1, M3