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Some Practical Guidance for the Implementation of Propensity Score Matching

32 Pages Posted: 11 May 2005  

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Sabine Kopeinig

University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

Propensity Score Matching (PSM) has become a popular approach to estimate causal treatment effects. It is widely applied when evaluating labour market policies, but empirical examples can be found in very diverse fields of study. Once the researcher has decided to use PSM, he is confronted with a lot of questions regarding its implementation. To begin with, a first decision has to be made concerning the estimation of the propensity score. Following that one has to decide which matching algorithm to choose and determine the region of common support. Subsequently, the matching quality has to be assessed and treatment effects and their standard errors have to be estimated. Furthermore, questions like "what to do if there is choice-based sampling?" or "when to measure effects?" can be important in empirical studies. Finally, one might also want to test the sensitivity of estimated treatment effects with respect to unobserved heterogeneity or failure of the common support condition. Each implementation step involves a lot of decisions and different approaches can be thought of. The aim of this paper is to discuss these implementation issues and give some guidance to researchers who want to use PSM for evaluation purposes.

Keywords: propensity score matching, implementation, evaluation, sensitivity

JEL Classification: C40, H43

Suggested Citation

Caliendo, Marco and Kopeinig, Sabine, Some Practical Guidance for the Implementation of Propensity Score Matching (May 2005). IZA Discussion Paper No. 1588. Available at SSRN: https://ssrn.com/abstract=721907

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, DE 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Sabine Kopeinig

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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