Do Instrumental Variables Belong in Propensity Scores?

Jay Bhattacharya and William Vogt ()

No 343, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: Propensity score matching is a popular way to make causal inferences about a binary treatment in observational data. The validity of these methods depends on which variables are used to predict the propensity score. We ask: "Absent strong ignorability, what would be the effect of including an instrumental variable in the predictor set of a propensity score matching estimator?" In the case of linear adjustment, using an instrumental variable as a predictor variable for the propensity score yields greater inconsistency than the naive estimator. This additional inconsistency is increasing in the predictive power of the instrument. In the case of stratification, with a strong instrument, propensity score matching yields greater inconsistency than the naive estimator. Since the propensity score matching estimator with the instrument in the predictor set is both more biased and more variable than the naive estimator, it is conceivable that the confidence intervals for the matching estimator would have greater coverage rates. In a Monte Carlo simulation, we show that this need not be the case. Our results are further illustrated with two empirical examples: one, the Tennessee STAR experiment, with a strong instrument and the other, the Connors' (1996) Swan-Ganz catheterization dataset, with a weak instrument.

JEL-codes: C1 I1 I2 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-ecm
Note: TWP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Do Instrumental Variables Belong in Propensity Scores? International Journal of Statistics & Economics 9(A12) (2012)

Downloads: (external link)
http://www.nber.org/papers/t0343.pdf (application/pdf)

Related works:
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:nbr:nberte:0343

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/t0343

Access Statistics for this paper

More papers in NBER Technical Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().