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Moving the Goalposts: Addressing Limited Overlap in the Estimation of Average Treatment Effects by Changing the Estimand

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

No 330, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: Estimation of average treatment effects under unconfoundedness or exogenous treatment assignment is often hampered by lack of overlap in the covariate distributions. 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 informal methods for trimming the sample. In this paper we develop a systematic approach to addressing such lack of overlap. We characterize optimal subsamples for which the average treatment effect can be estimated most precisely, as well as optimally weighted average treatment effects. 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 selection rule to drop all units with estimated propensity scores outside the range [0.1,0.9].

JEL-codes: C01 C1 C13 C14 C2 C21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2006-10
Note: TWP
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