Dealing with Limited Overlap in Estimation of Average Treatment Effects

V. Joseph Hotz, Richard Crump, Oscar Mitnik and Guido Imbens

Scholarly Articles from Harvard University Department of Economics

Abstract: Estimation of average treatment effects under unconfounded or ignorable treatment assignment is often hampered by lack of overlap in the covariate distributions between treatment groups. This lack of overlap can lead to imprecise estimates, and can make commonly used estimators sensitive to the choice of specification. In such cases researchers have often used ad hoc methods for trimming the sample. We develop a systematic approach to addressing lack of overlap. We characterize optimal subsamples for which the average treatment effect can be estimated most precisely. Under some conditions, the optimal selection rules depend solely on the propensity score. For a wide range of distributions, a good approximation to the optimal rule is provided by the simple rule of thumb to discard all units with estimated propensity scores outside the range [0.1,0.9].

Date: 2009
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Citations: View citations in EconPapers (365)

Published in Biometrika

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Related works:
Journal Article: Dealing with limited overlap in estimation of average treatment effects (2009)
Working Paper: Dealing with Limited Overlap in Estimation of Average Treatment Effects (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3007645

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