Propensity score matching and variations on the balancing test

Wang-Sheng Lee

Empirical Economics, 2013, vol. 44, issue 1, 47-80

Abstract: Balancing tests are diagnostics designed for use with propensity score methods, a widely used non-experimental approach in the evaluation literature. Such tests provide useful information on whether plausible counterfactuals have been created. Currently, multiple balancing tests exist in the literature but it is unclear which is the most useful. This article highlights the poor size properties of commonly employed balancing tests and attempts to shed some light on the link between the results of balancing tests and bias of the evaluation estimator. The simulation results suggest that in scenarios where the conditional independence assumption holds, a permutation version of the balancing test described in Dehejia and Wahba (Rev Econ Stat 84:151–161, 2002 ) can be useful in applied study. The proposed test has good size properties. In addition, the test appears to have good power for detecting a misspecification in the link function and some power for detecting an omission of relevant non-linear terms involving variables that are included at a lower order. Copyright Springer-Verlag 2013

Keywords: Matching; Propensity score; Balancing test; Permutation test; Monte Carlo simulation; C14; C99 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (78)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00181-011-0481-0 (text/html)
Access to full text is restricted to subscribers.

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:spr:empeco:v:44:y:2013:i:1:p:47-80

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-011-0481-0

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().