Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-57865
Wunderli, Dan (2012). Controlling the danger of false discoveries in estimating multiple treatment effects. Working paper series / Department of Economics 60, University of Zurich.
I expose the risk of false discoveries in the context of multiple treatment effects. A false discovery is a nonexistent effect that is falsely labeled as statistically significant by its individual t-value. Labeling nonexistent effects as statistically significant has wide-ranging academic and policy-related implications, like costly false conclusions from policy evaluations. I eexamine an empirical labor market model by using state-of-the art multiple testing methods and I provide simulation evidence. By merely using individual t-values at conventional significance levels, the risk of labeling probably nonexistent treatment effects as statistically significant is unacceptably high. Individual t-values even label a number of treatment effects as significant, whereas multiple testing indicates false discoveries in these cases. Tests of a joint null hypothesis such as the well-known F-test control the risk of false discoveries only to a limited extent and do not optimally allow for rejecting individual hypotheses. Multiple testing methods control the risk of false discoveries in general while allowing for individual decisions in the sense of rejecting individual hypotheses.
|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics|
Working Paper Series > Department of Economics
|JEL Classification:||C12, C14, C21, C31, C41, J08, J64|
|Uncontrolled Keywords:||False discoveries, multiple error rates, multiple treatment effects, labor market|
|Deposited On:||01 Feb 2012 12:40|
|Last Modified:||19 Mar 2013 14:19|
|Series Name:||Working paper series / Department of Economics|
|Number of Pages:||18|
|ISSN:||1664-7041 (P) 1664-705X (E)|
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