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Propensity Score Matching Example

The document discusses using propensity score matching to estimate the effect of a training program on earnings. It finds that after matching treated and control individuals, the training program lowered earnings by $6,000-$13,000 when using one period of data but increased earnings by $2,000-$3,000 when using the difference between two periods of data.

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dinesh dhanasekaran
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30 views

Propensity Score Matching Example

The document discusses using propensity score matching to estimate the effect of a training program on earnings. It finds that after matching treated and control individuals, the training program lowered earnings by $6,000-$13,000 when using one period of data but increased earnings by $2,000-$3,000 when using the difference between two periods of data.

Uploaded by

dinesh dhanasekaran
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Propensity Score Matching Example

Ani Katchova

© 2013 by Ani Katchova. All rights reserved.


Propensity Score Matching Example

 We want to study the effect of a training program on individuals’ earnings.


 Data are from the National Supported Work project and Dehejia and Wahba (1999)
 Treatment is if a person received training (treatment)
 Independent variables are age, education, and married
 Outcome is real earnings (RE78)
 For the difference-in-differences model, the outcome is the difference in earnings after and
before treatment (REDIFF)

Treatment Number of obs Percent frequency


0 2,490 93%
1 185 7%

 We need to find matches for the 185 treated observations and then compare outcomes
 Note from the output that not all of the control observations were used as matches for the 185
treated observations.

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Propensity score model (probit model)
Dependent variable is whether or not the individual participated in the program/treatment
Probit
coefficients
Age -0.05*
Education -0.17*
Married -1.47*

 Interpretation: individuals who are older, more educated, or married are less likely to receive
training.
 We are saving the propensity scores (predicted probabilities) from the probit model and using
them to find matches for the treated observations.
 The balancing property (similar characteristics between treated and control observations) is
satisfied.

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Average treatment effect on the treated
Estimation method Differences Difference-in-differences
using one period data (RE78) using two period data (REDIFF)
T-test -15,204* 2,327*
Regression with dummy -6,901* 2,276*
ATET nearest neighbor -6,715* 2,989*
ATET radius matching -13,252* 2,215*
ATET kernel matching -7,009* 2,803*
ATET stratification matching -6,497* 2,776*
ATET matching using R -6,681* 2,604*
Results from Stata, except last row is from R

 Interpretation: After matching treated and control individuals, the effects of the training
program are to lower the earnings by about $6,000 to $13,000 using one period of data. In
other words, people who received training earn less than those that did not received training.
 Interpretation: Using two period data (the outcome variable is the difference of after and before
periods), the results show that people who received training increases their earnings by $2,000
to $3,000.
 We can also express the ATET as a percentage of the average values if scale is an issue (say
comparing earnings in countries that have different average incomes). The average earnings is
$20,502, so these are economically significant changes.
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