Regression Discontinuity Inference with Specification Error

34 Pages Posted: 14 May 2006

See all articles by David Lee

David Lee

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: March 2006

Abstract

A regression discontinuity (RD) research design is appropriate for program evaluation problems in which treatment status (or the probability of treatment) depends on whether an observed covariate exceeds a fixed threshold. In many applications the treatment-determining covariate is discrete. This makes it impossible to compare outcomes for observations "just above" and "just below" the treatment threshold, and requires the researcher to choose a functional form for the relationship between the treatment variable and the outcomes of interest. We propose a simple econometric procedure to account for uncertainty in the choice of functional form for RD designs with discrete support. In particular, we model deviations of the true regression function from a given approximating function -- the specification errors -- as random. Conventional standard errors ignore the group structure induced by specification errors and tend to overstate the precision of the estimated program impacts. The proposed inference procedure that allows for specification error also has a natural interpretation within a Bayesian framework.

Suggested Citation

Lee, David S. and Card, David E., Regression Discontinuity Inference with Specification Error (March 2006). NBER Working Paper No. t0322. Available at SSRN: https://ssrn.com/abstract=889880

David S. Lee (Contact Author)

University of California, Berkeley - Department of Economics ( email )

Berkeley, CA 94720-3880
United States
510-642-4628 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David E. Card

University of California, Berkeley - Department of Economics ( email )

Room 3880
Berkeley, CA 94720-3880
United States
510-642-5222 (Phone)
510-643-7042 (Fax)

Institute for the Study of Labor (IZA)

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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