Propensity Score Weighting psw Recall expressions for \u0132 ate and \u0132 att in terms

# Propensity score weighting psw recall expressions for

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Propensity Score Weighting (psw) Recall expressions for Ĳ ate and Ĳ att in terms of (expectations of) functions of w, y and the propensity score (bottom of p.9 and top of p.10). These expressions are “weighted” means of y, where the weights are functions of w and the propensity score. A “natural” way to use them to estimate program effects is to estimate the propensity score and then take the sample averages of the above expressions. This can be expressed as follows: 14 W ˆ ate, psw = (1/N) N 1 i 6 » ¼ º « ¬ ª ± ± ± )) ( p ˆ 1 ( y ) w 1 ( ) ( p ˆ y w i i i i i i x x = (1/N) N 1 i 6 )) ( p ˆ 1 )( ( p ˆ y )) ( p ˆ w ( i i i i i x x x ± ± W ˆ att, psw = (1/N) N 1 i 6 )) ( p ˆ 1 ( ˆ y )) ( p ˆ w ( i i i i x x ± U ± where p ˆ ( x ) is an estimate of p( x ) and U ˆ = the fraction of observations for which w = 1. The propensity score can be estimated using a logit (or probit) functional form. It is best to use a flexible function form with lots of squared terms and interaction terms for the x variables. Hirano, Imbens and Ridder (2003) showed that if you increase the number of these terms as the sample size gets larger (this is known as a series estimator) this method is asymptotically efficient (in a semiparametric sense). Of course, we also need to get standard errors for these two estimates. This can be done using regressions methods. To get started, define d i as the “score” (vector of first derivatives for all x variables) of the log likelihood of the propensity score function p( x , Ȗ ) [see p.7 of Lecture 14], which has the parameters Ȗ : d i = d i (w i , x i , Ȗ ) = )) , ( p 1 )( , ( p )) , ( p w ( )' , ( p i i i i i Ȗ x Ȗ x Ȗ x Ȗ x Ȗ ± ± 15 Then define k i as: k i = )) , ( p 1 )( , ( p y )) , ( p w ( i i i i i Ȗ x Ȗ x Ȗ x ± ± Use your estimates of Ȗ to estimate d i and k i for all observations in the data. Denoting these estimates as i ˆ d and i k ˆ , regress i k ˆ on all the elements in i ˆ d and save the estimated residuals from this regression, which can be denoted as i e ˆ . Then the (asymptotic) standard error of W ˆ ate, psw can be calculated as: ( N)[(1/N) 2 i N 1 i e ˆ 6 ] 1/2 If you use a logit functional form for p( x ), then this is even simpler to do: d i simplifies to: d i = h i (w i - i p ˆ ) where h i is simply the x variables, including squared and interaction terms, and i p ˆ = exp( h i ƍ Ȗ ˆ )/(1 + exp( h i ƍ Ȗ ˆ )). Wooldridge shows on pp.923-924 that the standard error for W ˆ att, psw can be expressed as: 16 (1/ U ˆ ) 2 / 1 2 i psw , att i N 1 i ) w ˆ ( ) N / 1 ( » ¼ º « ¬ ª W ± 6 ( N) where the i ’s are the residuals from a regression of i q ˆ on i ˆ d , where i q ˆ = [w i - p( x i , Ȗ ˆ )]y i /[1 - p( x i , Ȗ ˆ )]. Propensity Score Regression On pages 924-927, Wooldridge discusses another population method using propensity scores. This is very simple; just regress y on a constant, w, and the estimated propensity score. However, he points out (p.927) that this method is, in general, inefficient.  #### You've reached the end of your free preview.

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