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On the Specification of Propensity Scores: With Applications to the Analysis of Trade Policies

48 Pages Posted: 25 Jul 2006  

Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics; IZA Institute of Labor Economics

Rusty Tchernis

Georgia State University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: September 29, 2006

Abstract

The use of propensity score methods for program evaluation with non-experimental data typically requires the propensity score be estimated, often with a model whose specification is unknown. While theoretical results suggest that estimators utilizing more flexible propensity score specifications perform better, this has not filtered into applied research. Here, we provide Monte Carlo evidence indicating the benefits of over-specifying the propensity score when using weighting estimators, as well as using normalized weights. We illustrate these results with an application assessing the environmental effects of GATT/WTO membership. We find that membership has a mixed impact, and that under-fitting the propensity score yields misleading inference in several cases.

Keywords: Treatment Effects, Propensity score, Specification, WTO, Environment

JEL Classification: C21, C52, F18

Suggested Citation

Millimet, Daniel L. and Tchernis, Rusty, On the Specification of Propensity Scores: With Applications to the Analysis of Trade Policies (September 29, 2006). CAEPR Working Paper No. 2006-013. Available at SSRN: https://ssrn.com/abstract=918454 or http://dx.doi.org/10.2139/ssrn.918454

Daniel L. Millimet (Contact Author)

Southern Methodist University (SMU) - Department of Economics ( email )

Box 750496
Dallas, TX 75275
United States
214-768-3269 (Phone)
214-768-1821 (Fax)

HOME PAGE: http:\\www.smu.edu\~millimet

IZA Institute of Labor Economics

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

Rusty Tchernis

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

HOME PAGE: http://www2.gsu.edu/~ecort

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

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

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