Propensity score matching and variations on the balancing test

Lee, Wang-Sheng 2013, Propensity score matching and variations on the balancing test, Empirical economics, vol. 44, no. 1, pp. 47-80.

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Title Propensity score matching and variations on the balancing test
Author(s) Lee, Wang-Sheng
Journal name Empirical economics
Volume number 44
Issue number 1
Start page 47
End page 80
Total pages 34
Publisher Springer
Place of publication Berlin, Germany
Publication date 2013-02
ISSN 0377-7332
1435-8921
Keyword(s) matching
propensity score
balancing test
permutation test
Monte Carlo simulation
Summary 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.
Language eng
Field of Research 140302 Econometric and Statistical Methods
Socio Economic Objective 910299 Microeconomics not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2013, Springer
Persistent URL http://hdl.handle.net/10536/DRO/DU:30053036

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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