The Elephant in the Corner: A Cautionary Tale about Measurement Error in Treatment Effects Models

Daniel Millimet

No 5140, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Researchers in economics and other disciplines are often interested in the causal effect of a binary treatment on outcomes. Econometric methods used to estimate such effects are divided into one of two strands depending on whether they require the conditional independence assumption (i.e., independence of potential outcomes and treatment assignment conditional on a set of observable covariates). When this assumption holds, researchers now have a wide array of estimation techniques from which to choose. However, very little is known about their performance – both in absolute and relative terms – when measurement error is present. In this study, the performance of several estimators that require the conditional independence assumption, as well as some that do not, are evaluated in a Monte Carlo study. In all cases, the data-generating process is such that conditional independence holds with the 'real' data. However, measurement error is then introduced. Specifically, three types of measurement error are considered: (i) errors in treatment assignment, (ii) errors in the outcome, and (iii) errors in the vector of covariates. Recommendations for researchers are provided.

Keywords: measurement error; selection on observables; propensity score; unconfoundedness; treatment effects (search for similar items in EconPapers)
JEL-codes: C21 C52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-08
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Advances in Econometrics: Missing-Data Methods, 2011, 27 A, 1-39

Downloads: (external link)
https://docs.iza.org/dp5140.pdf (application/pdf)

Related works:
Chapter: The Elephant in the Corner: A Cautionary Tale about Measurement Error in Treatment Effects Models (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5140

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().