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Poorly Measured Confounders are More Useful on the Left than on the Right


Pei, Zhuan; Pischke, Jörn-Steffen; Schwandt, Hannes (2019). Poorly Measured Confounders are More Useful on the Left than on the Right. Journal of Business and Economic Statistics, 37(2):205-216.

Abstract

Researchers frequently test identifying assumptions in regression-based research designs (which include instrumental variables or difference-in-differences models) by adding additional control variables on the right-hand side of the regression. If such additions do not affect the coefficient of interest (much), a study is presumed to be reliable. We caution that such invariance may result from the fact that the observed variables used in such robustness checks are often poor measures of the potential underlying confounders. In this case, a more powerful test of the identifying assumption is to put the variable on the left-hand side of the candidate regression. We provide derivations for the estimators and test statistics involved, as well as power calculations, which can help applied researchers interpret their findings. We illustrate these results in the context of estimating the returns to schooling.

Abstract

Researchers frequently test identifying assumptions in regression-based research designs (which include instrumental variables or difference-in-differences models) by adding additional control variables on the right-hand side of the regression. If such additions do not affect the coefficient of interest (much), a study is presumed to be reliable. We caution that such invariance may result from the fact that the observed variables used in such robustness checks are often poor measures of the potential underlying confounders. In this case, a more powerful test of the identifying assumption is to put the variable on the left-hand side of the candidate regression. We provide derivations for the estimators and test statistics involved, as well as power calculations, which can help applied researchers interpret their findings. We illustrate these results in the context of estimating the returns to schooling.

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Additional indexing

Item Type:Journal Article, not_refereed, original work
Communities & Collections:06 Faculty of Arts > Jacobs Center for Productive Youth Development
Dewey Decimal Classification:370 Education
Scopus Subject Areas:Physical Sciences > Statistics and Probability
Social Sciences & Humanities > Social Sciences (miscellaneous)
Social Sciences & Humanities > Economics and Econometrics
Social Sciences & Humanities > Statistics, Probability and Uncertainty
Uncontrolled Keywords:Statistics, Probability and Uncertainty, Economics and Econometrics, Statistics and Probability, Social Sciences (miscellaneous)
Language:English
Date:3 April 2019
Deposited On:25 Sep 2019 12:57
Last Modified:29 Jul 2020 11:23
Publisher:American Statistical Association
ISSN:0735-0015
OA Status:Closed
Publisher DOI:https://doi.org/10.1080/07350015.2018.1462710
Related URLs:https://www.zora.uzh.ch/id/eprint/136963/

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