CFDP 2115R

Finite-Sample Optimal Estimation and Inference on Average Treatment Effects Under Unconfoundedness

Author(s): 

Publication Date: December 2017

Revision Date: December 2018

Pages: 63

Abstract: 

We consider estimation and inference on average treatment effects under unconfoundedness conditional on the realizations of the treatment variable and covariates. Given nonparametric smoothness and/or shape restrictions on the conditional mean of the outcome variable, we derive estimators and confidence intervals (CIs) that are optimal infinite samples when the regression errors are normal with known variance. In contrast to conventional CIs, our CIs use a larger critical value that explicitly takes into account the potential bias of the estimator. When the error distribution is unknown, feasible versions of our CIs are valid asymptotically, even when √n-inference is not possible due to lack of overlap, or low smoothness of the conditional mean. We also derive the minimum smoothness conditions on the conditional mean that are necessary for √n-inference. When the conditional mean is restricted to be Lipschitz with a large enough bound on the Lipschitz constant, the optimal estimator reduces to a matching estimator with the number of matches set to one. We illustrate our methods in an application to the National Supported Work Demonstration.

Supplemental Material: Supplemental material

Supplement pages: 8

Keywords: 

Semiparametric estimation, Relative efficiency, Matching estimators, Treatment effects

JEL Classification Codes: C14

JEL Classification Codes: C14