Arthur Charpentier, SIDE Summer School, July 2019
# 11 Observations, Experiments & Causality
Arthur Charpentier (Universit´e du Qu´ebec `a Montr´eal)
Machine Learning & Econometrics
SIDE Summer School - July 2019
@freakonometrics freakonometrics freakonometrics.hypotheses.org 1
Arthur Charpentier, SIDE Summer School, July 2019
Causal Inference
“Social scientists know that large amounts
of data will not overcome the selection
problems that make causal inference so dif-
ficult”, Grimmer (2015, We Are All Social
Scientists Now: How Big Data, Machine
Learning, and Causal Inference Work To-
gether)
(source Pearl & Mackenzie (2018, The
Book of Why))
@freakonometrics freakonometrics freakonometrics.hypotheses.org 2
Arthur Charpentier, SIDE Summer School, July 2019
Causality and Counterfactuals
“we may define a cause to be an object, followed by another, and where all the
objects similar to the first are followed by objects similar to the second. Or in
other words where, if the first object had not been, the second never had existed”,
Hume (1748, An Enquiry Concerning Human Understanding)
Classical conditional : if X occurred, then Y occurred
Counterfactual : if X had not occurred, then Y would not have occurred
“no causation without manipulation”, Holland (1986, Statis-
tics and Causal Inference)
Importance of Directed Acyclic Graphs (DAG) to describe
causal effects between variables
@freakonometrics freakonometrics freakonometrics.hypotheses.org 3
Arthur Charpentier, SIDE Summer School, July 2019
Berkeley Gender Bias
Graduate admissions data from Berkeley, 1973
• men : 8442 applications, 44% admission rate
• women : 4321 applications, 35% admission rate
Discrimination towards women ?
A B C D E F
applied 825 560 325 417 191 373
M
admitted 62% 63% 37% 33% 28% 6%
applied 108 25 593 375 393 341
F
admitted 82% 68% 34% 35% 24% 7%
see Bickel et al. (1975, Sex bias in graduate admissions)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 4
Arthur Charpentier, SIDE Summer School, July 2019
Simpson’s Paradox & Ecological Fallacy
hosp. hosp.
A B
total 1000 1000
survivors 800 900
deads 200 100
rate (%) 80% 90%
hosp. hosp.
A B
total 600 900
survivors 590 870
deads 10 30
rate (%) 98% 97%
hosp. hosp.
A B
total 400 100
survivors 210 30
deads 190 70
rate (%) 53% 30%
@freakonometrics freakonometrics freakonometrics.hypotheses.org 5
Arthur Charpentier, SIDE Summer School, July 2019
Simpson’s Paradox & Ecological Fallacy
Heuristically, it is possible to have
a
A
≤
b
B
and
c
C
≤
d
D
and at the same time
a + c
A + C
≥
b + d
B + D
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−3 −2 −1 0 1 2 3−2024
@freakonometrics freakonometrics freakonometrics.hypotheses.org 6
Arthur Charpentier, SIDE Summer School, July 2019
Simpson’s Paradox & Ecological Fallacy
Heuristically, it is possible to have
a
A
≤
b
B
and
c
C
≤
d
D
and at the same time
a + c
A + C
≥
b + d
B + D
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−3 −2 −1 0 1 2 3−2024
@freakonometrics freakonometrics freakonometrics.hypotheses.org 7
Arthur Charpentier, SIDE Summer School, July 2019
Simpson’s Paradox & Ecological Fallacy
Heuristically, it is possible to have
a
A
≤
b
B
and
c
C
≤
d
D
and at the same time
a + c
A + C
≥
b + d
B + D
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−3 −2 −1 0 1 2 3−2024
@freakonometrics freakonometrics freakonometrics.hypotheses.org 8
Arthur Charpentier, SIDE Summer School, July 2019
Simpson’s Paradox & Ecological Fallacy
Very important concept in political science
see Gelman (1986, Red State, Blue State, Rich State,
Poor State: Why Americans Vote the Way They Do)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 9
Arthur Charpentier, SIDE Summer School, July 2019
Conditional Independence or could a machine create a DAG ?
Conditional Independence
X ⊥⊥ Y |Z if and only if
• f(x, y|z) = f(x|z) · f(y|z)
• f(x, y, z) · f(z) = f(x, z) · f(y, z)
• f(y|x, z) = f(y|z)
i.e. once we know Z, learning the value of x does not provide additional
information about X
Partial Correlation
ρxy|z =
ρxy − ρxz · ρyz
(1 − ρ2
xz) · (1 − ρ2
yz)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 10
Arthur Charpentier, SIDE Summer School, July 2019
Conditional Independence or could a machine create a DAG ?
as X ⊥⊥ Y =⇒ ρxy = 0, X ⊥⊥ Y |Z =⇒ ρxy|z = 0
and if (X, Y, Z) is Gaussian, the converse is true
as ρxy = 0 =⇒ X ⊥⊥ Y, ρxy|z = 0 =⇒ X ⊥⊥ Y |Z
@freakonometrics freakonometrics freakonometrics.hypotheses.org 11
Arthur Charpentier, SIDE Summer School, July 2019
Conditional Independence or could a machine create a DAG ?
Consider variables X1, X2, X3 and Y
We have
• X1 ⊥⊥ X2
• X1 ⊥⊥ X3
• X2 ⊥⊥ Y |X3
Using conditional independence tests,
remove edges, identify colliders and chains
(might not be a unique solution...)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 12
Arthur Charpentier, SIDE Summer School, July 2019
Conditional Independence or could a machine create a DAG ?
Assuming a Gaussian setting, Spirtes et al. (2000, Causation, Prediction, and
Search) suggested to test ρxy|z = 0 using
zn =
1
2
n − dim[z] − 3 log
|1 + ρxy|z|
|1 − ρxy|z|
One can also consider a non-parametric test, based on the distance
d(x, y, z) = f(x, y, z) · f(z) − f(x, z) · f(y, z)
(main issue here: curse of dimensionality)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 13
Arthur Charpentier, SIDE Summer School, July 2019
From DAG to Structural Econometric Equations
There is a one-to-one mapping between a system of structural
equations and a graphical model
• X2 = β23X3 + β21X1 + η2
• X3 = β31X1 + η3
• Y = β3X3 + ε
@freakonometrics freakonometrics freakonometrics.hypotheses.org 14
Arthur Charpentier, SIDE Summer School, July 2019
Observation and Experiment
Can we use observational data ?
Consider the following dataset (from Imai (2222) - resume.csv)
1 firstname
2 sex
3 race
4 callback
first name of the fictitious job applicant
sex of applicant, sex ∈ {female,male}
race of applicant, race ∈ {black,white}
whether a call back was made, call ∈ {0, 1}
See
1 firstname sex race callback
2 1 Allison female white 0
3 2 Kristen female white 0
4 3 Lakisha female black 0
5 4 Latonya female black 0
6 5 Carrie female white 0
7 6 Jay male white 0
@freakonometrics freakonometrics freakonometrics.hypotheses.org 15
Arthur Charpentier, SIDE Summer School, July 2019
Observation and Experiment
It is experimental data, collected from an experimental research design, in which
a treatment variable is manipulated in order to examine its causal effects on an
outcome variable.
The treatment refers to the race of a fictitious applicant, implied by the name
given on the r´esum´e.
The outcome variable is whether the applicant receives a callback.
We are interested in examining whether or not the r´esum´es with different names
yield varying callback rates.
no call call total
black 2278 157 2435
white 2200 235 2435
total 4478 392 4870
@freakonometrics freakonometrics freakonometrics.hypotheses.org 16
Arthur Charpentier, SIDE Summer School, July 2019
Observation and Experiment
Conditional probabilities
no call call total
black 50.87% 40.05% 50.00%
white 49.13% 59.95% 50.00%
total 100.00% 100.00% 100.00%
no call call total
black 93.55% 6.45% 100.00%
white 90.35% 9.65% 100.00%
total 91.95% 8.05% 100.00%
3.2% points difference...
@freakonometrics freakonometrics freakonometrics.hypotheses.org 17
Arthur Charpentier, SIDE Summer School, July 2019
Observation and ExperimentAisha
Rasheed
Keisha
Tremayne
Kareem
Darnell
Tyrone
Hakim
Tamika
Lakisha
Tanisha
Todd
Jamal
Neil
Brett
Geoffrey
Brendan
Greg
Emily
Anne
Jill
Latoya
Kenya
Matthew
Latonya
Leroy
Allison
Ebony
Jermaine
Laurie
Sarah
Meredith
Carrie
Kristen
Jay
Brad
0.00
0.05
0.10
0.15
Aisha
Rasheed
Keisha
Tremayne
Kareem
Darnell
Tyrone
Hakim
Tamika
Lakisha
Tanisha
Todd
Jamal
Neil
Brett
Geoffrey
Brendan
Greg
Emily
Anne
Jill
Latoya
Kenya
Matthew
Latonya
Leroy
Allison
Ebony
Jermaine
Laurie
Sarah
Meredith
Carrie
Kristen
Jay
Brad
0.00
0.05
0.10
0.15
@freakonometrics freakonometrics freakonometrics.hypotheses.org 18
Arthur Charpentier, SIDE Summer School, July 2019
Looking for a Conterfactual
1 firstname sex race callback
2 1 Allison female white 0
Would the same employer would have called back if the applicant’s name were
instead a stereotypically African-American.
Unfortunately, we would never observe this counterfactual outcome, because the
researchers who conducted this experiment did not send out the same r´esum´e to
the same employer using Lakisha as the first name.
Let t denote the treatment (the first name0) which sound African-American
(t = 1) or not (t = 0). Let y(t) denote the response (call back) as a function of
the treatment t. We do observe various covariate x = (x1, x2, · · · , xk) such as the
age, the education, etc.
@freakonometrics freakonometrics freakonometrics.hypotheses.org 19
Arthur Charpentier, SIDE Summer School, July 2019
Looking for a Conterfactual
The dataset is here
black-sounding callback age education
i name t y(t = 1) y(t = 0) x1 x2
1 1 1 ? 20 college
2 0 ? 0 55 high school
3 0 ? 1 40 graduate school
We would like to quantify ceteris paribus y(1) − y(0) (called causal effect)
Fundamental problem of causal inference : we cannot observe the counterfactual
outcomes
@freakonometrics freakonometrics freakonometrics.hypotheses.org 20
Arthur Charpentier, SIDE Summer School, July 2019
Looking for a Conterfactual
In observational studies, researchers do not conduct an intervention.
But they still want to quantify the impact of a policy. For instance the impact of
an increase of minimum wage on unemployment (see Card & Krueger (1994),
minwage.csv) )
In 1992, New Jersey (NJ) raised the minimum wage from 4.25to5.05 (per hour).
1 chain
2 location
3 wage_before
4 wage_after
5 full_before
6 full_after
7 part_before
8 part_after
name of fast-food restaurant chain
location of restaurants (centralNJ, northNJ, PA, shoreNJ, southNJ)
wage before minimum-wage increase
wage after minimum-wage increase
number of full-time employees
(before and after)
number of part-time employees
(before and after)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 21
Arthur Charpentier, SIDE Summer School, July 2019
Looking for a Conterfactual
One can look at a counterfactual, with a neighboring state - Pennsylvania (PA) -
that will be our control group
This would be a cross-section comparison design
NJ PA
below below
mean $5.5 mean $5.5
before $4.61 91.06% $4.65 94.03%
after $5.08 0.34% $4.61 95.52%
@freakonometrics freakonometrics freakonometrics.hypotheses.org 22
Arthur Charpentier, SIDE Summer School, July 2019
Looking for a Conterfactual
NJ PA
partial full proportion partial full proportion
before 5423 2319 29.9% 1291 714 35.6%
after 5351 2446 31.4% 1339 547 29.0%
Difference-in-differences estimate,
DID = yafter
t=1 − ybefore
t=1
difference in the treatment group
− yafter
t=0 − ybefore
t=0
difference in the control group
@freakonometrics freakonometrics freakonometrics.hypotheses.org 23
Arthur Charpentier, SIDE Summer School, July 2019
Observation and Experiment
q
q
q
q
Averageproportionofsalariesbelow$5.5(%)
q
q
q q
q q
020406080100
averagecausaleffect
NJ
PA
BEFORE AFTER
q
q
q
q
Averageproportionoffull...timeemployees(%)
q
q
q
q
q
q
20253035
averagecausaleffect
NJ
PA
BEFORE AFTER
(the counterfactual outcome for the treatment group has a time trend parallel to
that of the control group)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 24
Arthur Charpentier, SIDE Summer School, July 2019
Randomized Experiments
n individuals, that are either treated (ti = 1) or not (ti = 0). We observe
outcome yi for covariates xi.
We want to study potential outcomes yi(1) and yi(0)
turnout
yi(1) yi(0) ti x1,i x2,i
1 y1 ? 1 x1,1 x2,1
2 ? y2 0 x1,2 x2,2
...
...
...
...
...
...
n yn ? 1 x1,n x2,n
The causal effect is yi(1) − yi(0)
Assume no simultaneity, no interference between individuals and same treatment
@freakonometrics freakonometrics freakonometrics.hypotheses.org 25
Arthur Charpentier, SIDE Summer School, July 2019
Randomized Experiments
ATE - Average Treatment Effect
Average Treatment Effect E Y (1) − Y (0)
Sample Average Treatment Effect
1
n
n
i=1
yi(1) − yi(0)
Assume randomization of the treatment assignment, n1 treated, n0 non treated
Assumption : (Y (1), Y (0)) ⊥⊥ T
Crude estimator (difference in means), τ =
1
n1 i:ti=1
yi −
1
n0 i:ti=0
yi, or
τ =
n
i=1
tiyi
n1
−
(1 − ti)yi
n0
Then E τ = E Y (1) − Y (0)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 26
Arthur Charpentier, SIDE Summer School, July 2019
Randomized Experiments
Intuition with a simple regression, yi(ti) = α + βti + εi, where E ε = 0.
Causal effect is measured by yi(1) − yi(0) = β
More generally, assume that ε is ε(t) - with E ε(T) = 0, then
yi(1) − yi(0) = β + εi(1) − εi(0). Thus β = E[Yi(1) − Yi(0)] (and β = E[Yi(1))
and α = E[Yi(0)]
One can consider a more general model, with yi(ti) = α + βti + ε(ti) where
E[ε(t)] = 0.
Then β = E[Yi(1) − Yi(0)] and α = E[Yi(0)] (as previously)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 27
Arthur Charpentier, SIDE Summer School, July 2019
Randomized Experiments
In this model - introduced in Neyman (1923, Sur les applications de la th´eorie des
probabilit´es aux exp´eriences agricoles) - (called Rubin-Neyman) let σ2
t = Var[ε(t)]
Since τ =
1
n1 i:ti=1
yi −
1
n0 i:ti=0
yi =
1
n1
n
i=1
ti · yi −
1
n0
n
i=1
(1 − ti) · yi
The variance estimate of τ is usually biased
E
σ2
(ti − t)2
−
σ2
0
n0
+
σ2
1
n1
=
(n1 − n0)(n − 1)
n1n0(n − 2)
σ2
1 − σ2
0
so bias is null when either n1 = n0 or σ2
1 = σ2
0.
But generally biased (even asymptotically).
@freakonometrics freakonometrics freakonometrics.hypotheses.org 28
Arthur Charpentier, SIDE Summer School, July 2019
(Cluster) Randomized Experiments
One can also consider some cluster randomized experiments : treatment is at
cluster level, see Bland (2004, Cluster randomised trials in the medical literature) or
Boruch et al. (2004, Estimating the effects of interventions that are deployed in
many places: place-randomized trials)
Consider clusters j = 1, · · · , m, outcome is yi,j, with treatment tj ∈ {0, 1}.
Assume random assignment, i.e. (Yi,j(1), Yi,j(0)) ⊥⊥ Tj.
And for convenience, assume that nj’s are equal...
τ =
1
m1 j:tj =1
yj −
1
m0 j:tj =0
yj where yj =
1
nj
nj
i=1
yi,j
@freakonometrics freakonometrics freakonometrics.hypotheses.org 29
Arthur Charpentier, SIDE Summer School, July 2019
(Cluster) Randomized Experiments
As before, E τ = E Y (1) − Y (0)
Exact variance is Var[τ] =
Var[Y (1)]
m1
+
Var[Y (0)]
m0
,
where Var[Y (t)] =
σ2
t
n
[1 + (n − 1)ρt] ≤ σ2
t
(due to (possible) intracluster correlation ρt)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 30
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Propensity Score
In the regression discontinuity design, we want to find an (arbitrary) cutoff point
c that determines the treatment assignment, i.e. ti = 1xi≥c.
We want to estimate E[Yi(1) − Yi(0)|Xi = c]
Identification of the Average Treatment Effect :
Assumption 1: Overlap, ∀x, P[T = 1|X = x] ∈ (0, 1)
Assumption 2: Ignorability (Y (1), Y (0)) ⊥⊥ T|X = x, ∀x
Set µ(t, x) = E[Yi(t)|T = t, X = x]
Crude estimator (difference in means),
τ =
1
n
n
i=1
µ(1, x) − µ(0, x)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 31
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discontinuity
See Imbens & Lemieux (2008, Regression Discontinuity Designs).
@freakonometrics freakonometrics freakonometrics.hypotheses.org 32
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discontinuity
Consider the dataset from Lee (2008, Randomized ex-
periments from non-random selection in U.S. House
elections) - “How would the Democratic party have
performed in period 2, had they not held the seat (i.e.
had the Democrats lost the election in period 1)”
1 > library(RDDtools)
2 > data(Lee2008)
We want to test if there is a discontinuity
(in 0, x was rescaled here)
• with parametric tools
• with nonparametric tools
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−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
@freakonometrics freakonometrics freakonometrics.hypotheses.org 33
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discontinuity
Use some 4th order polynomial, on each part
1 > idx1 = (Lee2008$x >0)
2 > reg1 = lm(y˜poly(x ,4) ,data=Lee2008[idx1 ,])
3 > idx2 = (Lee2008$x <0)
4 > reg2 = lm(y˜poly(x ,4) ,data=Lee2008[idx2 ,])
5 > s1=predict(reg1 ,newdata=data.frame(x=0))
6 > s2=predict(reg2 ,newdata=data.frame(x=0))
7 > abs(s1 -s2)
8 1
9 0.07659014
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−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
@freakonometrics freakonometrics freakonometrics.hypotheses.org 34
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discontinuity
1 > reg_para <- RDDreg_lm(RDDdata(y =
Lee2008$y, x = Lee2008$x, cutpoint
= 0), order = 4)
2 > reg_para
3 ### RDD regression: parametric ###
4 Polynomial order: 4
5 Slopes: separate
6 Number of obs: 6558 (left: 2740 ,
right: 3818)
7
8 Coefficient :
9 Estimate Std. Error t value Pr(>|t|)
10 D 0.076590 0.013239 5.7851 7.582e -09
***
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−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
@freakonometrics freakonometrics freakonometrics.hypotheses.org 35
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discon-
tinuity
or use a simple local regression, see Imbens &
Kalyanaraman (2012).
1 > reg1 = ksmooth(Lee2008$x[idx1],
Lee2008$y[idx1], kernel = "normal",
bandwidth = 0.1)
2 > reg2 = ksmooth(Lee2008$x[idx2],
Lee2008$y[idx2], kernel = "normal",
bandwidth = 0.1)
3 > s1 = reg1$y[1]
4 > s2 = reg2$y[length(reg2$y)]
5 > abs(s1 -s2)
6 [1] 0.09883813
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−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
@freakonometrics freakonometrics freakonometrics.hypotheses.org 36
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Regression Discontinuity
1 > reg_nonpara <- RDDreg_np(RDDobject = Lee2008_
rdd , bw = .1)
2 > print(reg_nonpara)
3 ### RDD regression: nonparametric local linear
4 Bandwidth: 0.1
5 Number of obs: 1209 (left: 577, right: 632)
6
7 Coefficient :
8 Estimate Std. Error z value Pr(>|z|)
9 D 0.059397 0.014119 4.207 2.588e-05 ***
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−1.0 −0.5 0.0 0.5 1.0
0.00.20.40.60.81.0
x
y
q
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q q q q
q
q q q q q q q q
0.0 0.2 0.4 0.6 0.8 1.0
0.000.020.040.060.080.10
bandwidth
@freakonometrics freakonometrics freakonometrics.hypotheses.org 37
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Propensity Score
Propensity Score
The Propensity Score is the probability to receive the treatment π(x) =
P[T = 1|X = x]
Assumption: Balancing property T ⊥⊥ X|π(X)
Assumption: Exogeneity given the propensity score (Y (1), Y (0)) ⊥⊥ T|π(x), ∀x
τ =
n
i=1
tiyi
n1
−
(1 − ti)yi
n0
consider
τ =
n
i=1
tiyi
nπ(xi)
−
(1 − ti)yi
n(1 − π(xi))
@freakonometrics freakonometrics freakonometrics.hypotheses.org 38
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Propensity Score
Balancing condition: E
TY
π(X)
−
(1 − T)Y
1 − π(X)
= 0
See Lunceford & Davidian (2004, Stratification and Weighting Via the Propensity
Score)
Consider also Robins’s estimator,
τ =
n
i=1
µ(1, xi)
n
+
ti(yi − µ(1, xi))
nπ(xi)
−
n
i=1
µ(0, xi)
n
+
(1 − ti)(yi − µ(0, xi))
n(1 − π(xi))
@freakonometrics freakonometrics freakonometrics.hypotheses.org 39
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Matching
Consider a simple linear regression model, yi = α + βti + εi, then
β =
1
n
n
i=1
yi(1) − yi(0)
where
yi(1) =



yi if ti = 1
1
n1
n
j=1
tj · yj if ti = 0
yi(0) =



1
n0
n
j=1
(1 − tj) · yj if ti = 1
yi if ti = 0
@freakonometrics freakonometrics freakonometrics.hypotheses.org 40
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Matching
Consider a simple fixed effect regression model, yi,t = αi + βti,t + εi,t
β =
1
nT
n
i=1
T
t=1
yi,t(1) − yi,t(0)
where, if n1,i =
T
τ=1
ti,τ and n0,i = T − n1,i =
T
τ=1
(1 − ti,τ )
yi,t(1) =



yi,t if ti,t = 1
1
n1,i
T
τ=1
ti,τ · yi,τ if ti,t = 0
yi,t(0) =



1
n0,i
T
τ=1
(1 − ti,τ ) · yi,τ if ti,t = 1
yi,t if ti,t = 0
@freakonometrics freakonometrics freakonometrics.hypotheses.org 41
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Matching
β is actually the weighted least square estimate,
β = argmin
(α,β)
1
nT
n
i=1
T
t=1
ωi,t yi,t − αi − βti,t
with ωi,t = T/nt,i
More generally, we can have heterogeneity, i.e. yi,t = αi + βti,t + γ xi,t + εi,t
Let π(x) denote the propensity score P[T = 1|X = x].
@freakonometrics freakonometrics freakonometrics.hypotheses.org 42
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Matching
We have the following (ex-post) interpretation
yi,t − γ xi,t = αi + βti,t + εi,t
so use β the weighted least square estimate,
β = argmin
(α,β)
1
nT
n
i=1
T
t=1
ωi,t yi,t − αi − βti,t
with ωi,t = T/nt,i and
yi,t =



1
τ ti,τ π(xi,τ )−1
T
τ=1
ti,τ π(xi,τ )−1
· yi,τ if ti,t = 1
1
τ (1 − ti,τ )(1 − π(xi,τ ))−1
T
τ=1
(1 − ti,τ )(1 − π(xi,τ ))−1
· yi,τ if ti,t = 0
@freakonometrics freakonometrics freakonometrics.hypotheses.org 43
Arthur Charpentier, SIDE Summer School, July 2019
Observational Studies & Matching
This is just the general case of the simple 2 time-period difference in differences
yi,τ (t) = αi + βt + γτ + εi,τ
where τ is the time, τ ∈ {0, 1}. Hence
yi,0(0) = αi + εi,0
yi,1(0) = αiγ + εi,1
yi,1(1) = αiβ + γ + εi,1
Assumption: E[yi,1(0) − yi,0(0)|Ti,1 = t] = γ
i.e.: E[εi,1 − εi,0|Ti,1 = t] = 0
Imai et al. (2011, Unpacking the Black Box of Causality).
@freakonometrics freakonometrics freakonometrics.hypotheses.org 44
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
Assume that there is a possible mediator m
(possible indirect effects), see Baron & Kenny (1986, The
Moderator-Mediator Variable Distinction)
Brader, Valentino & Suhay (2008, What Triggers Public Opposition to
Immigration?)
Treatment t ∈ {causasian, latino} - randomized experiment
Outcome y is preference over immigration policy - measured
Mediation m is anxiety - measured
Bertrand & Mullainathan (2008, Are Emily and Greg More Employable than
Lakisha and Jamal?)
Treatment t ∈ {white name, black name} - randomized experiment
Outcome y{callback, no callback} - measured
@freakonometrics freakonometrics freakonometrics.hypotheses.org 45
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
Mediation m is perceived qualifications of applicants
(1) Regress y on t: yi = α1 + β1ti + ξ1 xi + ε1,i
(2) Regress m on t: mi = α2 + β2ti + ξ2 xi + ε2,i
(3) Regress y on m and t: yi = α3 + β3ti + γ3mi + ξ3 xi + ε3,i
for some control variables x
β1 is ATE, and can be decomposed in β1 = β3
direct
+ γβ2
indirect
@freakonometrics freakonometrics freakonometrics.hypotheses.org 46
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
Here m might depend on t, mi(ti) and y depends on m and t, yi(ti, mi(ti)).
• Indirect (mediation) causal effect is δi(t) = yi(t, mi(1)) − yi(t, mi(0))
(identification pb)
• Direct causal effect is ζi(t) = yi(1, mi(t)) − yi(0, mi(t))
Total causal effect is τi = yi(1, mi(1)) − yi(0, mi(0)) and
τ =
[δi(0) + ζi(0)] + [δi(1) + ζi(1)]
2
δi(t) measures counterfactuals about treatment-induced mediator values
• Controlled direct effects: ξi(t, m, w) = yi(t, m) − yi(t, w)
• Interaction effects: ξi(1, m, w) − ξi(0, m, w)
See mediation library
@freakonometrics freakonometrics freakonometrics.hypotheses.org 47
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
In Brader, Valentino & Suhay (2008, What Triggers Public Opposition to
Immigration?)
Randomized treatment: t is randomized given x, (Y, M) ⊥⊥ T|X
Sequential ignorability: m is randomized given x and t, Y ⊥⊥ M|T, X
Then
δ(t) = E[Yi|m, t, xi] dP[m|1, xi] − dP[m|0, xi] dP(xi)
ζ(t) = E[Yi|m, 1, xi] − E[Yi|m, 0, xi] dP[m|t, xi]dP(xi)
Use linear structural equations,



mi = α2 + β2ti + ξ2 xi + ε2,i
yi = α3 + β3ti + γ3mi + ξ3 xi + ε3,i
Separate least square to estimate β2 and γ and then Sobel test for significance
@freakonometrics freakonometrics freakonometrics.hypotheses.org 48
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
In Bertrand & Mullainathan (2008, Are Emily and Greg More Employable than
Lakisha and Jamal?), crossover desgin
(1) standard randomized experiment: send Jamal’s CV, record y
(2) change treatment to the opposite status, keep mediator fixed: send CV (same
qualification) as Greg, record y
similar to Hainmueller & Hiscox (2010, Attitudes toward Highly Skilled and
Low-skilled Immigration)
Baron-Kenny Procedure
(1) regress y on t (significant relationship)
(2) regress m on t (significant relationship)
(3) regress y on m and t (significant relationship between y and m)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 49
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
E.g. binary mediator m ∈ {0, 1},
logit[E[Mi|ti, xi]] = α2 + β2ti + ξ2 xi
logit[E[Yi|mi, ti, xi]] = α3 + β3ti + γ3mi + ξ3 xi+
Cannot use β2γ, or β1 − β3 if
logit[E[Yi|ti, xi]] = α1 + β1ti + ξ1 xi
Assume that ρ2,3 = Corr[ε2, ε3]. Sequential ignorability means ρ2,3 = 0.
δ(0) = δ(1) =
β2σ1
σ2
ρ1,2 − ρ2,3
1 − ρ2
1,2
1 − ρ2
2,3
Thus, δ(t) = 0 means ρ2,3 = ρ1,2.
@freakonometrics freakonometrics freakonometrics.hypotheses.org 50
Arthur Charpentier, SIDE Summer School, July 2019
Experimental / Observational Studies & Mediation
1 > fit_m <- lm(mediator ˜ treat + x)
2 > fit_y <- lm(y ˜ treat + mediator +x)
For the mediation analysis use
1 > med <- mediation :: mediate(fit_m, fit_y, treat="treat", mediator="
mediator")
and for the sensitivity analysis
1 > mediation :: medsens(med)
2 > plot(medsens(med), "rho")
Problem, sometimes m is difficult to manipulate.
Use instrumental variables
@freakonometrics freakonometrics freakonometrics.hypotheses.org 51
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
Prediction with Machine Learning techniques ?
Get the smallest mean-squared error in a test set...
Given a candidate µ(x), use
1
n
n
i=1
(yi − µ(xi))2
With a tree, µ(x) is the sample mean of yi’s within leaf (x)
The in-sample goodness of fit measure is the mse, mse =
1
n
n
i=1
(yi − µ(xi))2
Try to minimize mse + λ · number of leaves
Select λ with lowest out-of-sample goodness of fit measure, or use
cross-validation.
1 > tree <- rpart(y ˜ x, method="anova")
2 > i <- which.min(tree$cptable[,"xerror"])
3 > tree_2 <- prune(tree , cp=tree$cptable[i,"CP])
@freakonometrics freakonometrics freakonometrics.hypotheses.org 52
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
Consider our causal model, an let τi denote the treatment effect τi = yi(1) − yi(0)
Consider possible heterogeneity, set µ(t, x) = E[Y (t)|T = t, X = x] and
τ(x) = µ(1, x) − µ(0, x)
To estimate τ(x) a partition tree can be more interesting than a linear predictor.
Approach 1 : analyze the two groups separately
• estimate µ(1, x) on the sub-dataset where ti = 1
• estimate µ(0, x) on the sub-dataset where ti = 0
• use propensity score weighting
• (use within group cross-validation to tune parameters)
• prediction is τ(x) = µ(1, x) − µ(0, x)
Approach 2 : estimate µ(t, x) on both covariates
@freakonometrics freakonometrics freakonometrics.hypotheses.org 53
Arthur Charpentier, SIDE Summer School, July 2019
Instruments
Recall that in a regression model, yi = xi β + εi, with endogeneous variables
E(xi εi) = 0 and least squares estimators are not convergent (plimβ = β as
n → ∞)
Classical motivations
• variable omission : the true model is yi = xi β + zi γ + εi, then
plimβ + β + E(X X)−1
E(X Z)γ = β
See Mincer equation, where y is the wage, x the number of years of study, but
there might be some ability bias
• measurement error : the true model is yi = xi β + εi where variables are
measured with error, xi = x + ηi where E[ηi|xi ] = 0 and ηi ⊥ εi. Thus,
yi = xi β + νi where νi = εi − β ηi. Here, E[νixi] = −βVar[η] = 0, and
plimβ + β + E(X X)−1
E(X η)γ = β
• simultaneity bias
@freakonometrics freakonometrics freakonometrics.hypotheses.org 54
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
Assume here that yi = xi β + b˜xi + εi, where
• E(xi εi) = 0
• E(˜xi εi) = 0
We will use instruments z that
• should be exogeneous, E(zi εi) = 0
• should add information to x, in the sense that in the regression
yi = xi β + zi γ + εi, γ = 0
Set
ˆx = Z(Z Z)−1
Z ˜x
and observe that
ˆx = Z(Z Z)−1
Z x = x
@freakonometrics freakonometrics freakonometrics.hypotheses.org 55
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
Thus, define the filtrated model
yi = ˆxi β + bˆxi + ˆεi = xi β + bˆxi + ˆεi
where ˆε = ε + (˜x − ˆx).
From the rank condition, (Z Z)−1
Z X exists
The filtrated model is exogeneous, in the sens that plim
1
n
n
i=1
ˆxi ˆεi − −
The IV estimate is here β = (Z Z)−1
Z y
More generally,
yi = xi β
exogeneous
+ ˜xi γ
endogeneous
+εi
@freakonometrics freakonometrics freakonometrics.hypotheses.org 56
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
Consider instruments zi and set zi = (zi, xi), such that they
• should be exogeneous, E[zi εi] = 0
• should add information to x, in the sense that
rank(E[zi xi]) = dim(x) + dim(˜x) (rank condition)
Note that if rank < dim(x) + dim(˜x) the model is under-identified
Note that if rank > dim(x) + dim(˜x) the model is over-identified
indirect least square
The rank condition means that E[Z X] can be inverted, and
β = E[Z X]−1
E[Z Y ]
and the empirical version is
β = [Z X]−1
Z y
@freakonometrics freakonometrics freakonometrics.hypotheses.org 57
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
More generally, we can have some over-identified model
We need to find a matrix A such that AE[Z X] can be inverted, and then
β = E[AZ X]−1
E[AZ Y ]
and the empirical version is
βA = [AZ X]−1
AZ y
Then, for any A such that this estimator exists βA is convergent and
asymptotically Gaussian.
@freakonometrics freakonometrics freakonometrics.hypotheses.org 58
Arthur Charpentier, SIDE Summer School, July 2019
Causal Trees
There is an optimal matrix A such that the asymptotic variable of βA is
minimal, and it is
A = E[X Z ]−1
E[Z Z ]
Set An = X Z (Z Z )−1
, then An → A , and then, the empirical estimator is
the so-called double-least-square estimate
β = [X Z (Z Z )−1
Z X]−1
X Z (Z Z )−1
Z y
or
β = [ΠZ X ΠZ X]−1
ΠZ X y = ( ˜X ˜X)−1 ˜Xy
which is called double-least-square estimate since
• we consider the regression of x on z
• we consider the regression of y on ˜x
Sometimes, instruments are poor proxys for endogeneous variables, and are called
weak instruments.
@freakonometrics freakonometrics freakonometrics.hypotheses.org 59
Arthur Charpentier, SIDE Summer School, July 2019
Appendix: Regression Trees
One can use the within variance (within a leaf)
• within a leaf the total sum of squares is
i
(yi − y)2
• if we split in two parts,
i:L
(yi − yL)2
+
i:R
(yi − yR)2
The spluit is chosen to maximize
i
(yi − y)2
−
i:L
(yi − yL)2
−
i:R
(yi − yR)2
(one can use Student t-test for pruning)
See the application on the Chicago dataset, with 3 explanatory variables
@freakonometrics freakonometrics freakonometrics.hypotheses.org 60
Arthur Charpentier, SIDE Summer School, July 2019
Appendix: Regression Trees
@freakonometrics freakonometrics freakonometrics.hypotheses.org 61
Arthur Charpentier, SIDE Summer School, July 2019
Appendix: Regression Trees
One can use the entropy (that can be related to Kullback-Leibler distance)
Entropy
For a random variable X the entropy is H(X) = −EX [log f(X)]
Natural extensions are the joint entropy H(X, Y ) = −EX,Y [log f(X, Y )]
and the conditional entropy H(Y |X) = −EX,Y [log f(Y |X)]
Since H(X) = H(Y ), H(Y |X) = H(X|Y ).
Mutual Information
Mutual information of (X, Y ) is I(X, Y ) = EX,Y log
f(X, Y )
f(X)f(Y )
I(X, Y ) = H(X) − H(X|Y ) = H(Y ) − H(Y |X) = H(X) + H(Y ) − H(X, Y )
@freakonometrics freakonometrics freakonometrics.hypotheses.org 62
Arthur Charpentier, SIDE Summer School, July 2019
Appendix: Regression Trees
I(X, Y ) ≥ 0, and I(X, Y ) = 0 if and only if X ⊥⊥ Y
thus H(X) ≤ H(X|Y ) and H(X) = H(X|Y ) if and only if X ⊥⊥ Y
Kullback-Leibler
For two distributions f, g KL(f g) = Ef log
f(X)
g(X)
= log
f(x)
g(x)
f(x)dx
Hence, I(X, Y ) = KL(f f⊥
)
Thus, Kullback-Leibler divergence can be called relative entropy.
@freakonometrics freakonometrics freakonometrics.hypotheses.org 63
Arthur Charpentier, SIDE Summer School, July 2019
Appendix: Regression Trees
For a Gaussian vector N(µ, Σ), the joint entropy is
h(Z) =
1
2
log (2π)d
|Σ|
If Z ∈ argmax{H(Z)} s.t. Var[Z] = Σ, then Z ∼ N(E[Z ], Σ)
Cross entropy
For distributions f, g, CE(f|g) = −Ef [log g(X)] = − log[g(x)]f(x)dx
CE(f|g) = H(f) + KL(f g)
@freakonometrics freakonometrics freakonometrics.hypotheses.org 64

Side 2019 #11

  • 1.
    Arthur Charpentier, SIDESummer School, July 2019 # 11 Observations, Experiments & Causality Arthur Charpentier (Universit´e du Qu´ebec `a Montr´eal) Machine Learning & Econometrics SIDE Summer School - July 2019 @freakonometrics freakonometrics freakonometrics.hypotheses.org 1
  • 2.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Inference “Social scientists know that large amounts of data will not overcome the selection problems that make causal inference so dif- ficult”, Grimmer (2015, We Are All Social Scientists Now: How Big Data, Machine Learning, and Causal Inference Work To- gether) (source Pearl & Mackenzie (2018, The Book of Why)) @freakonometrics freakonometrics freakonometrics.hypotheses.org 2
  • 3.
    Arthur Charpentier, SIDESummer School, July 2019 Causality and Counterfactuals “we may define a cause to be an object, followed by another, and where all the objects similar to the first are followed by objects similar to the second. Or in other words where, if the first object had not been, the second never had existed”, Hume (1748, An Enquiry Concerning Human Understanding) Classical conditional : if X occurred, then Y occurred Counterfactual : if X had not occurred, then Y would not have occurred “no causation without manipulation”, Holland (1986, Statis- tics and Causal Inference) Importance of Directed Acyclic Graphs (DAG) to describe causal effects between variables @freakonometrics freakonometrics freakonometrics.hypotheses.org 3
  • 4.
    Arthur Charpentier, SIDESummer School, July 2019 Berkeley Gender Bias Graduate admissions data from Berkeley, 1973 • men : 8442 applications, 44% admission rate • women : 4321 applications, 35% admission rate Discrimination towards women ? A B C D E F applied 825 560 325 417 191 373 M admitted 62% 63% 37% 33% 28% 6% applied 108 25 593 375 393 341 F admitted 82% 68% 34% 35% 24% 7% see Bickel et al. (1975, Sex bias in graduate admissions) @freakonometrics freakonometrics freakonometrics.hypotheses.org 4
  • 5.
    Arthur Charpentier, SIDESummer School, July 2019 Simpson’s Paradox & Ecological Fallacy hosp. hosp. A B total 1000 1000 survivors 800 900 deads 200 100 rate (%) 80% 90% hosp. hosp. A B total 600 900 survivors 590 870 deads 10 30 rate (%) 98% 97% hosp. hosp. A B total 400 100 survivors 210 30 deads 190 70 rate (%) 53% 30% @freakonometrics freakonometrics freakonometrics.hypotheses.org 5
  • 6.
    Arthur Charpentier, SIDESummer School, July 2019 Simpson’s Paradox & Ecological Fallacy Heuristically, it is possible to have a A ≤ b B and c C ≤ d D and at the same time a + c A + C ≥ b + d B + D q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q −3 −2 −1 0 1 2 3−2024 @freakonometrics freakonometrics freakonometrics.hypotheses.org 6
  • 7.
    Arthur Charpentier, SIDESummer School, July 2019 Simpson’s Paradox & Ecological Fallacy Heuristically, it is possible to have a A ≤ b B and c C ≤ d D and at the same time a + c A + C ≥ b + d B + D q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q −3 −2 −1 0 1 2 3−2024 @freakonometrics freakonometrics freakonometrics.hypotheses.org 7
  • 8.
    Arthur Charpentier, SIDESummer School, July 2019 Simpson’s Paradox & Ecological Fallacy Heuristically, it is possible to have a A ≤ b B and c C ≤ d D and at the same time a + c A + C ≥ b + d B + D q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q −3 −2 −1 0 1 2 3−2024 @freakonometrics freakonometrics freakonometrics.hypotheses.org 8
  • 9.
    Arthur Charpentier, SIDESummer School, July 2019 Simpson’s Paradox & Ecological Fallacy Very important concept in political science see Gelman (1986, Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do) @freakonometrics freakonometrics freakonometrics.hypotheses.org 9
  • 10.
    Arthur Charpentier, SIDESummer School, July 2019 Conditional Independence or could a machine create a DAG ? Conditional Independence X ⊥⊥ Y |Z if and only if • f(x, y|z) = f(x|z) · f(y|z) • f(x, y, z) · f(z) = f(x, z) · f(y, z) • f(y|x, z) = f(y|z) i.e. once we know Z, learning the value of x does not provide additional information about X Partial Correlation ρxy|z = ρxy − ρxz · ρyz (1 − ρ2 xz) · (1 − ρ2 yz) @freakonometrics freakonometrics freakonometrics.hypotheses.org 10
  • 11.
    Arthur Charpentier, SIDESummer School, July 2019 Conditional Independence or could a machine create a DAG ? as X ⊥⊥ Y =⇒ ρxy = 0, X ⊥⊥ Y |Z =⇒ ρxy|z = 0 and if (X, Y, Z) is Gaussian, the converse is true as ρxy = 0 =⇒ X ⊥⊥ Y, ρxy|z = 0 =⇒ X ⊥⊥ Y |Z @freakonometrics freakonometrics freakonometrics.hypotheses.org 11
  • 12.
    Arthur Charpentier, SIDESummer School, July 2019 Conditional Independence or could a machine create a DAG ? Consider variables X1, X2, X3 and Y We have • X1 ⊥⊥ X2 • X1 ⊥⊥ X3 • X2 ⊥⊥ Y |X3 Using conditional independence tests, remove edges, identify colliders and chains (might not be a unique solution...) @freakonometrics freakonometrics freakonometrics.hypotheses.org 12
  • 13.
    Arthur Charpentier, SIDESummer School, July 2019 Conditional Independence or could a machine create a DAG ? Assuming a Gaussian setting, Spirtes et al. (2000, Causation, Prediction, and Search) suggested to test ρxy|z = 0 using zn = 1 2 n − dim[z] − 3 log |1 + ρxy|z| |1 − ρxy|z| One can also consider a non-parametric test, based on the distance d(x, y, z) = f(x, y, z) · f(z) − f(x, z) · f(y, z) (main issue here: curse of dimensionality) @freakonometrics freakonometrics freakonometrics.hypotheses.org 13
  • 14.
    Arthur Charpentier, SIDESummer School, July 2019 From DAG to Structural Econometric Equations There is a one-to-one mapping between a system of structural equations and a graphical model • X2 = β23X3 + β21X1 + η2 • X3 = β31X1 + η3 • Y = β3X3 + ε @freakonometrics freakonometrics freakonometrics.hypotheses.org 14
  • 15.
    Arthur Charpentier, SIDESummer School, July 2019 Observation and Experiment Can we use observational data ? Consider the following dataset (from Imai (2222) - resume.csv) 1 firstname 2 sex 3 race 4 callback first name of the fictitious job applicant sex of applicant, sex ∈ {female,male} race of applicant, race ∈ {black,white} whether a call back was made, call ∈ {0, 1} See 1 firstname sex race callback 2 1 Allison female white 0 3 2 Kristen female white 0 4 3 Lakisha female black 0 5 4 Latonya female black 0 6 5 Carrie female white 0 7 6 Jay male white 0 @freakonometrics freakonometrics freakonometrics.hypotheses.org 15
  • 16.
    Arthur Charpentier, SIDESummer School, July 2019 Observation and Experiment It is experimental data, collected from an experimental research design, in which a treatment variable is manipulated in order to examine its causal effects on an outcome variable. The treatment refers to the race of a fictitious applicant, implied by the name given on the r´esum´e. The outcome variable is whether the applicant receives a callback. We are interested in examining whether or not the r´esum´es with different names yield varying callback rates. no call call total black 2278 157 2435 white 2200 235 2435 total 4478 392 4870 @freakonometrics freakonometrics freakonometrics.hypotheses.org 16
  • 17.
    Arthur Charpentier, SIDESummer School, July 2019 Observation and Experiment Conditional probabilities no call call total black 50.87% 40.05% 50.00% white 49.13% 59.95% 50.00% total 100.00% 100.00% 100.00% no call call total black 93.55% 6.45% 100.00% white 90.35% 9.65% 100.00% total 91.95% 8.05% 100.00% 3.2% points difference... @freakonometrics freakonometrics freakonometrics.hypotheses.org 17
  • 18.
    Arthur Charpentier, SIDESummer School, July 2019 Observation and ExperimentAisha Rasheed Keisha Tremayne Kareem Darnell Tyrone Hakim Tamika Lakisha Tanisha Todd Jamal Neil Brett Geoffrey Brendan Greg Emily Anne Jill Latoya Kenya Matthew Latonya Leroy Allison Ebony Jermaine Laurie Sarah Meredith Carrie Kristen Jay Brad 0.00 0.05 0.10 0.15 Aisha Rasheed Keisha Tremayne Kareem Darnell Tyrone Hakim Tamika Lakisha Tanisha Todd Jamal Neil Brett Geoffrey Brendan Greg Emily Anne Jill Latoya Kenya Matthew Latonya Leroy Allison Ebony Jermaine Laurie Sarah Meredith Carrie Kristen Jay Brad 0.00 0.05 0.10 0.15 @freakonometrics freakonometrics freakonometrics.hypotheses.org 18
  • 19.
    Arthur Charpentier, SIDESummer School, July 2019 Looking for a Conterfactual 1 firstname sex race callback 2 1 Allison female white 0 Would the same employer would have called back if the applicant’s name were instead a stereotypically African-American. Unfortunately, we would never observe this counterfactual outcome, because the researchers who conducted this experiment did not send out the same r´esum´e to the same employer using Lakisha as the first name. Let t denote the treatment (the first name0) which sound African-American (t = 1) or not (t = 0). Let y(t) denote the response (call back) as a function of the treatment t. We do observe various covariate x = (x1, x2, · · · , xk) such as the age, the education, etc. @freakonometrics freakonometrics freakonometrics.hypotheses.org 19
  • 20.
    Arthur Charpentier, SIDESummer School, July 2019 Looking for a Conterfactual The dataset is here black-sounding callback age education i name t y(t = 1) y(t = 0) x1 x2 1 1 1 ? 20 college 2 0 ? 0 55 high school 3 0 ? 1 40 graduate school We would like to quantify ceteris paribus y(1) − y(0) (called causal effect) Fundamental problem of causal inference : we cannot observe the counterfactual outcomes @freakonometrics freakonometrics freakonometrics.hypotheses.org 20
  • 21.
    Arthur Charpentier, SIDESummer School, July 2019 Looking for a Conterfactual In observational studies, researchers do not conduct an intervention. But they still want to quantify the impact of a policy. For instance the impact of an increase of minimum wage on unemployment (see Card & Krueger (1994), minwage.csv) ) In 1992, New Jersey (NJ) raised the minimum wage from 4.25to5.05 (per hour). 1 chain 2 location 3 wage_before 4 wage_after 5 full_before 6 full_after 7 part_before 8 part_after name of fast-food restaurant chain location of restaurants (centralNJ, northNJ, PA, shoreNJ, southNJ) wage before minimum-wage increase wage after minimum-wage increase number of full-time employees (before and after) number of part-time employees (before and after) @freakonometrics freakonometrics freakonometrics.hypotheses.org 21
  • 22.
    Arthur Charpentier, SIDESummer School, July 2019 Looking for a Conterfactual One can look at a counterfactual, with a neighboring state - Pennsylvania (PA) - that will be our control group This would be a cross-section comparison design NJ PA below below mean $5.5 mean $5.5 before $4.61 91.06% $4.65 94.03% after $5.08 0.34% $4.61 95.52% @freakonometrics freakonometrics freakonometrics.hypotheses.org 22
  • 23.
    Arthur Charpentier, SIDESummer School, July 2019 Looking for a Conterfactual NJ PA partial full proportion partial full proportion before 5423 2319 29.9% 1291 714 35.6% after 5351 2446 31.4% 1339 547 29.0% Difference-in-differences estimate, DID = yafter t=1 − ybefore t=1 difference in the treatment group − yafter t=0 − ybefore t=0 difference in the control group @freakonometrics freakonometrics freakonometrics.hypotheses.org 23
  • 24.
    Arthur Charpentier, SIDESummer School, July 2019 Observation and Experiment q q q q Averageproportionofsalariesbelow$5.5(%) q q q q q q 020406080100 averagecausaleffect NJ PA BEFORE AFTER q q q q Averageproportionoffull...timeemployees(%) q q q q q q 20253035 averagecausaleffect NJ PA BEFORE AFTER (the counterfactual outcome for the treatment group has a time trend parallel to that of the control group) @freakonometrics freakonometrics freakonometrics.hypotheses.org 24
  • 25.
    Arthur Charpentier, SIDESummer School, July 2019 Randomized Experiments n individuals, that are either treated (ti = 1) or not (ti = 0). We observe outcome yi for covariates xi. We want to study potential outcomes yi(1) and yi(0) turnout yi(1) yi(0) ti x1,i x2,i 1 y1 ? 1 x1,1 x2,1 2 ? y2 0 x1,2 x2,2 ... ... ... ... ... ... n yn ? 1 x1,n x2,n The causal effect is yi(1) − yi(0) Assume no simultaneity, no interference between individuals and same treatment @freakonometrics freakonometrics freakonometrics.hypotheses.org 25
  • 26.
    Arthur Charpentier, SIDESummer School, July 2019 Randomized Experiments ATE - Average Treatment Effect Average Treatment Effect E Y (1) − Y (0) Sample Average Treatment Effect 1 n n i=1 yi(1) − yi(0) Assume randomization of the treatment assignment, n1 treated, n0 non treated Assumption : (Y (1), Y (0)) ⊥⊥ T Crude estimator (difference in means), τ = 1 n1 i:ti=1 yi − 1 n0 i:ti=0 yi, or τ = n i=1 tiyi n1 − (1 − ti)yi n0 Then E τ = E Y (1) − Y (0) @freakonometrics freakonometrics freakonometrics.hypotheses.org 26
  • 27.
    Arthur Charpentier, SIDESummer School, July 2019 Randomized Experiments Intuition with a simple regression, yi(ti) = α + βti + εi, where E ε = 0. Causal effect is measured by yi(1) − yi(0) = β More generally, assume that ε is ε(t) - with E ε(T) = 0, then yi(1) − yi(0) = β + εi(1) − εi(0). Thus β = E[Yi(1) − Yi(0)] (and β = E[Yi(1)) and α = E[Yi(0)] One can consider a more general model, with yi(ti) = α + βti + ε(ti) where E[ε(t)] = 0. Then β = E[Yi(1) − Yi(0)] and α = E[Yi(0)] (as previously) @freakonometrics freakonometrics freakonometrics.hypotheses.org 27
  • 28.
    Arthur Charpentier, SIDESummer School, July 2019 Randomized Experiments In this model - introduced in Neyman (1923, Sur les applications de la th´eorie des probabilit´es aux exp´eriences agricoles) - (called Rubin-Neyman) let σ2 t = Var[ε(t)] Since τ = 1 n1 i:ti=1 yi − 1 n0 i:ti=0 yi = 1 n1 n i=1 ti · yi − 1 n0 n i=1 (1 − ti) · yi The variance estimate of τ is usually biased E σ2 (ti − t)2 − σ2 0 n0 + σ2 1 n1 = (n1 − n0)(n − 1) n1n0(n − 2) σ2 1 − σ2 0 so bias is null when either n1 = n0 or σ2 1 = σ2 0. But generally biased (even asymptotically). @freakonometrics freakonometrics freakonometrics.hypotheses.org 28
  • 29.
    Arthur Charpentier, SIDESummer School, July 2019 (Cluster) Randomized Experiments One can also consider some cluster randomized experiments : treatment is at cluster level, see Bland (2004, Cluster randomised trials in the medical literature) or Boruch et al. (2004, Estimating the effects of interventions that are deployed in many places: place-randomized trials) Consider clusters j = 1, · · · , m, outcome is yi,j, with treatment tj ∈ {0, 1}. Assume random assignment, i.e. (Yi,j(1), Yi,j(0)) ⊥⊥ Tj. And for convenience, assume that nj’s are equal... τ = 1 m1 j:tj =1 yj − 1 m0 j:tj =0 yj where yj = 1 nj nj i=1 yi,j @freakonometrics freakonometrics freakonometrics.hypotheses.org 29
  • 30.
    Arthur Charpentier, SIDESummer School, July 2019 (Cluster) Randomized Experiments As before, E τ = E Y (1) − Y (0) Exact variance is Var[τ] = Var[Y (1)] m1 + Var[Y (0)] m0 , where Var[Y (t)] = σ2 t n [1 + (n − 1)ρt] ≤ σ2 t (due to (possible) intracluster correlation ρt) @freakonometrics freakonometrics freakonometrics.hypotheses.org 30
  • 31.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Propensity Score In the regression discontinuity design, we want to find an (arbitrary) cutoff point c that determines the treatment assignment, i.e. ti = 1xi≥c. We want to estimate E[Yi(1) − Yi(0)|Xi = c] Identification of the Average Treatment Effect : Assumption 1: Overlap, ∀x, P[T = 1|X = x] ∈ (0, 1) Assumption 2: Ignorability (Y (1), Y (0)) ⊥⊥ T|X = x, ∀x Set µ(t, x) = E[Yi(t)|T = t, X = x] Crude estimator (difference in means), τ = 1 n n i=1 µ(1, x) − µ(0, x) @freakonometrics freakonometrics freakonometrics.hypotheses.org 31
  • 32.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discontinuity See Imbens & Lemieux (2008, Regression Discontinuity Designs). @freakonometrics freakonometrics freakonometrics.hypotheses.org 32
  • 33.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discontinuity Consider the dataset from Lee (2008, Randomized ex- periments from non-random selection in U.S. House elections) - “How would the Democratic party have performed in period 2, had they not held the seat (i.e. had the Democrats lost the election in period 1)” 1 > library(RDDtools) 2 > data(Lee2008) We want to test if there is a discontinuity (in 0, x was rescaled here) • with parametric tools • with nonparametric tools q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q qq qq q q q q q q qqq qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q qq q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qqqqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q q q q q qq qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qqq q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q q q q qqq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qqq q q q q q q qqq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q qqq q q q q qq q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qqq q q q q q q q q q q q q q q q q q qq q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qqq q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q qqq qqqq qq q qqq q q q qq qqq q qqq qqq q q qqqqqqq qqq qqq q q qqq qq qqq q q qqq q q qqqqqqqqq q qqq q q qq qq qqqqq q qqq q q qqqqqq qqq q qqq q q qqqq qq q qq q qqq q q q qqq q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q qq qq q q q q qq q qqq q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q qq qq q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqqq q q q q q q q q q q q qqqq q q q q q q q q q q q qqqqq q q q qq q q q q q q q q q q q q q q q q q q q q qqqqq q q q q q q q q q q q qqq q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q qq q q qq q qq q q q q q q q q q q q q qq q q q qq q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q qqqqqq q qq q q q q q q qqqq q q q q q qq q q q q qqqq q q q q q q q q q q q q q q q q q q q q q q q q q qqqqq q q q q q qq q q q q qqq q q q q q q q q q q q q qqqq q q q q q q q q q q q qqqqq q q q q q q q q q q qqqq q q qq q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q qqqq qq q q q q q qqqqqqq q q q q q q q q qqq q q q q q q q q q q q q qqqqq q q q qq q q q q qqqqq qq q qq q q q q qq q q q qq q q q q q qq qqqq q q q q q q q q q q q q qq q q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qq q q q qq q q q qq q q q q q q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q qq q q q q q q qqq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqqqq q q qq q q qq qq qq q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q qqqq q q q q q q q q q q q qqq q q q q q q q q q q q qqqqq q q q q q q q q q q q qq q q qq q qq q q q q q q q q q q q q q q q q q q q q qqqqq qq q q q q q q q q q q q q q q q q qq q q q q q q qqqq qq qq q q qq q q qq q q q q q q q q q q q q q q q q q q q q qq q q qq q q qqq q q q q q q q q q q q q qqq q q q q qq q q q q q q q qqq q q q q q q q q q q q q qqqq qq q q q q q q q q qqqq q q q q q q q q q q q q q q qq qq q q q q q q q q qqqqq q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q qqq q q qqq q q q q qq q q q q q q q q q q q q qq q q qq q q q q q q q q q qqq q q q qq q q q q q q qqqqq qq q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q qq q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q qqq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qqqq q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q qq q q q q q q qqq qqq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq q q q q q qq q q qq q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q qqq q q q qqq q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q qq q q q q q q q q q qq q q q q q q q q q q qq q qq q q q q q q q q q q q q q qq q q q q qq q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q qqq q q q q q q −1.0 −0.5 0.0 0.5 1.0 0.00.20.40.60.81.0 x y −1.0 −0.5 0.0 0.5 1.0 0.00.20.40.60.81.0 x y @freakonometrics freakonometrics freakonometrics.hypotheses.org 33
  • 34.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discontinuity Use some 4th order polynomial, on each part 1 > idx1 = (Lee2008$x >0) 2 > reg1 = lm(y˜poly(x ,4) ,data=Lee2008[idx1 ,]) 3 > idx2 = (Lee2008$x <0) 4 > reg2 = lm(y˜poly(x ,4) ,data=Lee2008[idx2 ,]) 5 > s1=predict(reg1 ,newdata=data.frame(x=0)) 6 > s2=predict(reg2 ,newdata=data.frame(x=0)) 7 > abs(s1 -s2) 8 1 9 0.07659014 q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q qq qq q q q q q q qqq qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q qq q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q 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q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q qqq q q q q q q −1.0 −0.5 0.0 0.5 1.0 0.00.20.40.60.81.0 x y @freakonometrics freakonometrics freakonometrics.hypotheses.org 34
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    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discontinuity 1 > reg_para <- RDDreg_lm(RDDdata(y = Lee2008$y, x = Lee2008$x, cutpoint = 0), order = 4) 2 > reg_para 3 ### RDD regression: parametric ### 4 Polynomial order: 4 5 Slopes: separate 6 Number of obs: 6558 (left: 2740 , right: 3818) 7 8 Coefficient : 9 Estimate Std. Error t value Pr(>|t|) 10 D 0.076590 0.013239 5.7851 7.582e -09 *** q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q qq qq q q q q q q qqq qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q 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q q qqqq qq q q q q q qqqqqqq q q q q q q q q qqq q q q q q q q q q q q q qqqqq q q q qq q q q q qqqqq qq q qq q q q q qq q q q qq q q q q q qq qqqq q q q q q q q q q q q q qq q q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qq q q q qq q q q qq q q q q q q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q qq q q q q q q qqq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqqqq q q qq q q qq qq qq q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q qqqq q q q q q q q q q q q qqq q q q q q q q q q q q qqqqq q q q q q q q q q q q qq q q qq q qq q q q q q q q q q q q q q q q q q q q q qqqqq qq q q q q q q q q q q q q q q q q qq q q q q q q qqqq qq qq q q qq q q qq q q q q q q q q q q q q q q q q q q q q qq q q qq q q qqq q q q q q q q q q q 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q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qqqq q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q qq q q q q q q qqq qqq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq q q q q q qq q q qq q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q qqq q q q qqq q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q qq q q q q q q q q q qq q q q q q q q q q q qq q qq q q q q q q q q q q q q q qq q q q q qq q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q qqq q q q q q q −1.0 −0.5 0.0 0.5 1.0 0.00.20.40.60.81.0 x y @freakonometrics freakonometrics freakonometrics.hypotheses.org 35
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    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discon- tinuity or use a simple local regression, see Imbens & Kalyanaraman (2012). 1 > reg1 = ksmooth(Lee2008$x[idx1], Lee2008$y[idx1], kernel = "normal", bandwidth = 0.1) 2 > reg2 = ksmooth(Lee2008$x[idx2], Lee2008$y[idx2], kernel = "normal", bandwidth = 0.1) 3 > s1 = reg1$y[1] 4 > s2 = reg2$y[length(reg2$y)] 5 > abs(s1 -s2) 6 [1] 0.09883813 q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q qq q qq q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q qqq q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q 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    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Regression Discontinuity 1 > reg_nonpara <- RDDreg_np(RDDobject = Lee2008_ rdd , bw = .1) 2 > print(reg_nonpara) 3 ### RDD regression: nonparametric local linear 4 Bandwidth: 0.1 5 Number of obs: 1209 (left: 577, right: 632) 6 7 Coefficient : 8 Estimate Std. 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q q q qqq q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q q q q qqq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qqq q q q q q q qqq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q qqq q q q q qq q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qqq q q q q q q q q q q q q q q q q q qq q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q qqq q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q qq q q qq q q q q q q q q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q qqq qqqq qq q qqq q q q qq qqq q qqq qqq q q qqqqqqq qqq qqq q q qqq qq qqq q q qqq q q qqqqqqqqq q qqq q q qq qq qqqqq q qqq q q qqqqqq qqq q qqq q q qqqq qq q qq q qqq q q q qqq q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q qq q q q q q q q q q qq q q q q q q q q q q q q q q q qq qq q q q q qq q qqq q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q qq qq q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqqq q q q q q q q q q q q qqqq q q q q q q q q q q q qqqqq q q q qq q q q q q q q q q q q q q q q q q q q q qqqqq q q q q q q q q q q q qqq q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q qq q q qq q qq q q q q q q q q q q q q qq q q q qq q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q qqqqqq q qq q q q q q q qqqq q q q q q qq q q q q qqqq q q q q q q q q q q q q q q q q q q q q q q q q q qqqqq q q q q q qq q q q q qqq q q q q q q q q q q q q qqqq q q q q q q q q q q q qqqqq q q q q q q q q q q qqqq q q qq q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q qq q q q q q q qq q q q q q q q q q q q q q q qqqq qq q q q q q qqqqqqq q q q q q q q q qqq q q q q q q q q q q q q qqqqq q q q qq q q q q qqqqq qq q qq q q q q qq q q q qq q q q q q qq qqqq q q q q q q q q q q q q qq q q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qqq q q q q q q q q q q q q qq q q q qq q q q qq q q q q q q q q qq q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q qq q q q q q q q q q qq q q q q q q qqq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q qqqqq q q qq q q qq qq qq q q q qq q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q qqqq q q q q q q q q q q q qqq q q q q q q q q q q q qqqqq q q q q q q q q q q q qq q q qq q qq q q q q q q q q q q q q q q q q q q q q qqqqq qq q q q q q q q q q q q q q q q q qq q q q q q q qqqq qq qq q q qq q q qq q q q q q q q q q q q q q q q q q q q q qq q q qq q q qqq q q q q q q q q q q q q qqq q q q q qq q q q q q q q qqq q q q q q q q q q q q q qqqq qq q q q q q q q q qqqq q q q q q q q q q q q q q q qq qq q q q q q q q q qqqqq q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q qqq q q qqq q q q q qq q q q q q q q q q q q q qq q q qq q q q q q q q q q qqq q q q qq q q q q q q qqqqq qq q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q qq q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q qqq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qqqq q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q qq q q q q q q qqq qqq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q qq q q q q q q q q q q q q qq q q q q q q q qq q q q q q qq q q qq q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q qqq q q q qqq q q q q q q q q q q q q qq q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q qq q q q q q q q q qq q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q qq q q q q q q q q q qq q q q q q q q q q q qq q qq q q q q q q q q q q q q q qq q q q q qq q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q qq q q q qq q q q q q q q q q q q q qq q qq q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qqq q q q q q q q q q q q qq q q q q q q q q q qq q q q q q q q q q qqq q q q q q q −1.0 −0.5 0.0 0.5 1.0 0.00.20.40.60.81.0 x y q q q q q q q q q q q q q q q q q q q q 0.0 0.2 0.4 0.6 0.8 1.0 0.000.020.040.060.080.10 bandwidth @freakonometrics freakonometrics freakonometrics.hypotheses.org 37
  • 38.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Propensity Score Propensity Score The Propensity Score is the probability to receive the treatment π(x) = P[T = 1|X = x] Assumption: Balancing property T ⊥⊥ X|π(X) Assumption: Exogeneity given the propensity score (Y (1), Y (0)) ⊥⊥ T|π(x), ∀x τ = n i=1 tiyi n1 − (1 − ti)yi n0 consider τ = n i=1 tiyi nπ(xi) − (1 − ti)yi n(1 − π(xi)) @freakonometrics freakonometrics freakonometrics.hypotheses.org 38
  • 39.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Propensity Score Balancing condition: E TY π(X) − (1 − T)Y 1 − π(X) = 0 See Lunceford & Davidian (2004, Stratification and Weighting Via the Propensity Score) Consider also Robins’s estimator, τ = n i=1 µ(1, xi) n + ti(yi − µ(1, xi)) nπ(xi) − n i=1 µ(0, xi) n + (1 − ti)(yi − µ(0, xi)) n(1 − π(xi)) @freakonometrics freakonometrics freakonometrics.hypotheses.org 39
  • 40.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Matching Consider a simple linear regression model, yi = α + βti + εi, then β = 1 n n i=1 yi(1) − yi(0) where yi(1) =    yi if ti = 1 1 n1 n j=1 tj · yj if ti = 0 yi(0) =    1 n0 n j=1 (1 − tj) · yj if ti = 1 yi if ti = 0 @freakonometrics freakonometrics freakonometrics.hypotheses.org 40
  • 41.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Matching Consider a simple fixed effect regression model, yi,t = αi + βti,t + εi,t β = 1 nT n i=1 T t=1 yi,t(1) − yi,t(0) where, if n1,i = T τ=1 ti,τ and n0,i = T − n1,i = T τ=1 (1 − ti,τ ) yi,t(1) =    yi,t if ti,t = 1 1 n1,i T τ=1 ti,τ · yi,τ if ti,t = 0 yi,t(0) =    1 n0,i T τ=1 (1 − ti,τ ) · yi,τ if ti,t = 1 yi,t if ti,t = 0 @freakonometrics freakonometrics freakonometrics.hypotheses.org 41
  • 42.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Matching β is actually the weighted least square estimate, β = argmin (α,β) 1 nT n i=1 T t=1 ωi,t yi,t − αi − βti,t with ωi,t = T/nt,i More generally, we can have heterogeneity, i.e. yi,t = αi + βti,t + γ xi,t + εi,t Let π(x) denote the propensity score P[T = 1|X = x]. @freakonometrics freakonometrics freakonometrics.hypotheses.org 42
  • 43.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Matching We have the following (ex-post) interpretation yi,t − γ xi,t = αi + βti,t + εi,t so use β the weighted least square estimate, β = argmin (α,β) 1 nT n i=1 T t=1 ωi,t yi,t − αi − βti,t with ωi,t = T/nt,i and yi,t =    1 τ ti,τ π(xi,τ )−1 T τ=1 ti,τ π(xi,τ )−1 · yi,τ if ti,t = 1 1 τ (1 − ti,τ )(1 − π(xi,τ ))−1 T τ=1 (1 − ti,τ )(1 − π(xi,τ ))−1 · yi,τ if ti,t = 0 @freakonometrics freakonometrics freakonometrics.hypotheses.org 43
  • 44.
    Arthur Charpentier, SIDESummer School, July 2019 Observational Studies & Matching This is just the general case of the simple 2 time-period difference in differences yi,τ (t) = αi + βt + γτ + εi,τ where τ is the time, τ ∈ {0, 1}. Hence yi,0(0) = αi + εi,0 yi,1(0) = αiγ + εi,1 yi,1(1) = αiβ + γ + εi,1 Assumption: E[yi,1(0) − yi,0(0)|Ti,1 = t] = γ i.e.: E[εi,1 − εi,0|Ti,1 = t] = 0 Imai et al. (2011, Unpacking the Black Box of Causality). @freakonometrics freakonometrics freakonometrics.hypotheses.org 44
  • 45.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation Assume that there is a possible mediator m (possible indirect effects), see Baron & Kenny (1986, The Moderator-Mediator Variable Distinction) Brader, Valentino & Suhay (2008, What Triggers Public Opposition to Immigration?) Treatment t ∈ {causasian, latino} - randomized experiment Outcome y is preference over immigration policy - measured Mediation m is anxiety - measured Bertrand & Mullainathan (2008, Are Emily and Greg More Employable than Lakisha and Jamal?) Treatment t ∈ {white name, black name} - randomized experiment Outcome y{callback, no callback} - measured @freakonometrics freakonometrics freakonometrics.hypotheses.org 45
  • 46.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation Mediation m is perceived qualifications of applicants (1) Regress y on t: yi = α1 + β1ti + ξ1 xi + ε1,i (2) Regress m on t: mi = α2 + β2ti + ξ2 xi + ε2,i (3) Regress y on m and t: yi = α3 + β3ti + γ3mi + ξ3 xi + ε3,i for some control variables x β1 is ATE, and can be decomposed in β1 = β3 direct + γβ2 indirect @freakonometrics freakonometrics freakonometrics.hypotheses.org 46
  • 47.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation Here m might depend on t, mi(ti) and y depends on m and t, yi(ti, mi(ti)). • Indirect (mediation) causal effect is δi(t) = yi(t, mi(1)) − yi(t, mi(0)) (identification pb) • Direct causal effect is ζi(t) = yi(1, mi(t)) − yi(0, mi(t)) Total causal effect is τi = yi(1, mi(1)) − yi(0, mi(0)) and τ = [δi(0) + ζi(0)] + [δi(1) + ζi(1)] 2 δi(t) measures counterfactuals about treatment-induced mediator values • Controlled direct effects: ξi(t, m, w) = yi(t, m) − yi(t, w) • Interaction effects: ξi(1, m, w) − ξi(0, m, w) See mediation library @freakonometrics freakonometrics freakonometrics.hypotheses.org 47
  • 48.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation In Brader, Valentino & Suhay (2008, What Triggers Public Opposition to Immigration?) Randomized treatment: t is randomized given x, (Y, M) ⊥⊥ T|X Sequential ignorability: m is randomized given x and t, Y ⊥⊥ M|T, X Then δ(t) = E[Yi|m, t, xi] dP[m|1, xi] − dP[m|0, xi] dP(xi) ζ(t) = E[Yi|m, 1, xi] − E[Yi|m, 0, xi] dP[m|t, xi]dP(xi) Use linear structural equations,    mi = α2 + β2ti + ξ2 xi + ε2,i yi = α3 + β3ti + γ3mi + ξ3 xi + ε3,i Separate least square to estimate β2 and γ and then Sobel test for significance @freakonometrics freakonometrics freakonometrics.hypotheses.org 48
  • 49.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation In Bertrand & Mullainathan (2008, Are Emily and Greg More Employable than Lakisha and Jamal?), crossover desgin (1) standard randomized experiment: send Jamal’s CV, record y (2) change treatment to the opposite status, keep mediator fixed: send CV (same qualification) as Greg, record y similar to Hainmueller & Hiscox (2010, Attitudes toward Highly Skilled and Low-skilled Immigration) Baron-Kenny Procedure (1) regress y on t (significant relationship) (2) regress m on t (significant relationship) (3) regress y on m and t (significant relationship between y and m) @freakonometrics freakonometrics freakonometrics.hypotheses.org 49
  • 50.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation E.g. binary mediator m ∈ {0, 1}, logit[E[Mi|ti, xi]] = α2 + β2ti + ξ2 xi logit[E[Yi|mi, ti, xi]] = α3 + β3ti + γ3mi + ξ3 xi+ Cannot use β2γ, or β1 − β3 if logit[E[Yi|ti, xi]] = α1 + β1ti + ξ1 xi Assume that ρ2,3 = Corr[ε2, ε3]. Sequential ignorability means ρ2,3 = 0. δ(0) = δ(1) = β2σ1 σ2 ρ1,2 − ρ2,3 1 − ρ2 1,2 1 − ρ2 2,3 Thus, δ(t) = 0 means ρ2,3 = ρ1,2. @freakonometrics freakonometrics freakonometrics.hypotheses.org 50
  • 51.
    Arthur Charpentier, SIDESummer School, July 2019 Experimental / Observational Studies & Mediation 1 > fit_m <- lm(mediator ˜ treat + x) 2 > fit_y <- lm(y ˜ treat + mediator +x) For the mediation analysis use 1 > med <- mediation :: mediate(fit_m, fit_y, treat="treat", mediator=" mediator") and for the sensitivity analysis 1 > mediation :: medsens(med) 2 > plot(medsens(med), "rho") Problem, sometimes m is difficult to manipulate. Use instrumental variables @freakonometrics freakonometrics freakonometrics.hypotheses.org 51
  • 52.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees Prediction with Machine Learning techniques ? Get the smallest mean-squared error in a test set... Given a candidate µ(x), use 1 n n i=1 (yi − µ(xi))2 With a tree, µ(x) is the sample mean of yi’s within leaf (x) The in-sample goodness of fit measure is the mse, mse = 1 n n i=1 (yi − µ(xi))2 Try to minimize mse + λ · number of leaves Select λ with lowest out-of-sample goodness of fit measure, or use cross-validation. 1 > tree <- rpart(y ˜ x, method="anova") 2 > i <- which.min(tree$cptable[,"xerror"]) 3 > tree_2 <- prune(tree , cp=tree$cptable[i,"CP]) @freakonometrics freakonometrics freakonometrics.hypotheses.org 52
  • 53.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees Consider our causal model, an let τi denote the treatment effect τi = yi(1) − yi(0) Consider possible heterogeneity, set µ(t, x) = E[Y (t)|T = t, X = x] and τ(x) = µ(1, x) − µ(0, x) To estimate τ(x) a partition tree can be more interesting than a linear predictor. Approach 1 : analyze the two groups separately • estimate µ(1, x) on the sub-dataset where ti = 1 • estimate µ(0, x) on the sub-dataset where ti = 0 • use propensity score weighting • (use within group cross-validation to tune parameters) • prediction is τ(x) = µ(1, x) − µ(0, x) Approach 2 : estimate µ(t, x) on both covariates @freakonometrics freakonometrics freakonometrics.hypotheses.org 53
  • 54.
    Arthur Charpentier, SIDESummer School, July 2019 Instruments Recall that in a regression model, yi = xi β + εi, with endogeneous variables E(xi εi) = 0 and least squares estimators are not convergent (plimβ = β as n → ∞) Classical motivations • variable omission : the true model is yi = xi β + zi γ + εi, then plimβ + β + E(X X)−1 E(X Z)γ = β See Mincer equation, where y is the wage, x the number of years of study, but there might be some ability bias • measurement error : the true model is yi = xi β + εi where variables are measured with error, xi = x + ηi where E[ηi|xi ] = 0 and ηi ⊥ εi. Thus, yi = xi β + νi where νi = εi − β ηi. Here, E[νixi] = −βVar[η] = 0, and plimβ + β + E(X X)−1 E(X η)γ = β • simultaneity bias @freakonometrics freakonometrics freakonometrics.hypotheses.org 54
  • 55.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees Assume here that yi = xi β + b˜xi + εi, where • E(xi εi) = 0 • E(˜xi εi) = 0 We will use instruments z that • should be exogeneous, E(zi εi) = 0 • should add information to x, in the sense that in the regression yi = xi β + zi γ + εi, γ = 0 Set ˆx = Z(Z Z)−1 Z ˜x and observe that ˆx = Z(Z Z)−1 Z x = x @freakonometrics freakonometrics freakonometrics.hypotheses.org 55
  • 56.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees Thus, define the filtrated model yi = ˆxi β + bˆxi + ˆεi = xi β + bˆxi + ˆεi where ˆε = ε + (˜x − ˆx). From the rank condition, (Z Z)−1 Z X exists The filtrated model is exogeneous, in the sens that plim 1 n n i=1 ˆxi ˆεi − − The IV estimate is here β = (Z Z)−1 Z y More generally, yi = xi β exogeneous + ˜xi γ endogeneous +εi @freakonometrics freakonometrics freakonometrics.hypotheses.org 56
  • 57.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees Consider instruments zi and set zi = (zi, xi), such that they • should be exogeneous, E[zi εi] = 0 • should add information to x, in the sense that rank(E[zi xi]) = dim(x) + dim(˜x) (rank condition) Note that if rank < dim(x) + dim(˜x) the model is under-identified Note that if rank > dim(x) + dim(˜x) the model is over-identified indirect least square The rank condition means that E[Z X] can be inverted, and β = E[Z X]−1 E[Z Y ] and the empirical version is β = [Z X]−1 Z y @freakonometrics freakonometrics freakonometrics.hypotheses.org 57
  • 58.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees More generally, we can have some over-identified model We need to find a matrix A such that AE[Z X] can be inverted, and then β = E[AZ X]−1 E[AZ Y ] and the empirical version is βA = [AZ X]−1 AZ y Then, for any A such that this estimator exists βA is convergent and asymptotically Gaussian. @freakonometrics freakonometrics freakonometrics.hypotheses.org 58
  • 59.
    Arthur Charpentier, SIDESummer School, July 2019 Causal Trees There is an optimal matrix A such that the asymptotic variable of βA is minimal, and it is A = E[X Z ]−1 E[Z Z ] Set An = X Z (Z Z )−1 , then An → A , and then, the empirical estimator is the so-called double-least-square estimate β = [X Z (Z Z )−1 Z X]−1 X Z (Z Z )−1 Z y or β = [ΠZ X ΠZ X]−1 ΠZ X y = ( ˜X ˜X)−1 ˜Xy which is called double-least-square estimate since • we consider the regression of x on z • we consider the regression of y on ˜x Sometimes, instruments are poor proxys for endogeneous variables, and are called weak instruments. @freakonometrics freakonometrics freakonometrics.hypotheses.org 59
  • 60.
    Arthur Charpentier, SIDESummer School, July 2019 Appendix: Regression Trees One can use the within variance (within a leaf) • within a leaf the total sum of squares is i (yi − y)2 • if we split in two parts, i:L (yi − yL)2 + i:R (yi − yR)2 The spluit is chosen to maximize i (yi − y)2 − i:L (yi − yL)2 − i:R (yi − yR)2 (one can use Student t-test for pruning) See the application on the Chicago dataset, with 3 explanatory variables @freakonometrics freakonometrics freakonometrics.hypotheses.org 60
  • 61.
    Arthur Charpentier, SIDESummer School, July 2019 Appendix: Regression Trees @freakonometrics freakonometrics freakonometrics.hypotheses.org 61
  • 62.
    Arthur Charpentier, SIDESummer School, July 2019 Appendix: Regression Trees One can use the entropy (that can be related to Kullback-Leibler distance) Entropy For a random variable X the entropy is H(X) = −EX [log f(X)] Natural extensions are the joint entropy H(X, Y ) = −EX,Y [log f(X, Y )] and the conditional entropy H(Y |X) = −EX,Y [log f(Y |X)] Since H(X) = H(Y ), H(Y |X) = H(X|Y ). Mutual Information Mutual information of (X, Y ) is I(X, Y ) = EX,Y log f(X, Y ) f(X)f(Y ) I(X, Y ) = H(X) − H(X|Y ) = H(Y ) − H(Y |X) = H(X) + H(Y ) − H(X, Y ) @freakonometrics freakonometrics freakonometrics.hypotheses.org 62
  • 63.
    Arthur Charpentier, SIDESummer School, July 2019 Appendix: Regression Trees I(X, Y ) ≥ 0, and I(X, Y ) = 0 if and only if X ⊥⊥ Y thus H(X) ≤ H(X|Y ) and H(X) = H(X|Y ) if and only if X ⊥⊥ Y Kullback-Leibler For two distributions f, g KL(f g) = Ef log f(X) g(X) = log f(x) g(x) f(x)dx Hence, I(X, Y ) = KL(f f⊥ ) Thus, Kullback-Leibler divergence can be called relative entropy. @freakonometrics freakonometrics freakonometrics.hypotheses.org 63
  • 64.
    Arthur Charpentier, SIDESummer School, July 2019 Appendix: Regression Trees For a Gaussian vector N(µ, Σ), the joint entropy is h(Z) = 1 2 log (2π)d |Σ| If Z ∈ argmax{H(Z)} s.t. Var[Z] = Σ, then Z ∼ N(E[Z ], Σ) Cross entropy For distributions f, g, CE(f|g) = −Ef [log g(X)] = − log[g(x)]f(x)dx CE(f|g) = H(f) + KL(f g) @freakonometrics freakonometrics freakonometrics.hypotheses.org 64