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  • Mostly Harmless Econometrics Notes Part 1

    Enviado por

    Liam Donovan
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    This document discusses key concepts in causal inference research: 1) It introduces four frequently asked questions (FAQs) about causal research design, including identifying the causal relationship of interest and the ideal experimental method. 2) Randomized experiments are described as the best research design but are often infeasible, so natural sources of random variation are exploited instead. 3) Regression analysis is discussed as a tool for causal inference, but cannot prove causality without random assignment to control for selection bias. 4) The conditional expectation function is presented as a way to decompose a random variable and understand the predictive power of regression even when it cannot prove causation.

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    first 2.5 chapters of Mostly Harmless Econometrics bare-bones notes

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    This document discusses key concepts in causal inference research: 1) It introduces four frequently asked questions (FAQs) about causal research design, including identifying the causal relationship of interest and the ideal experimental method. 2) Randomized experiments are described as the best research design but are often infeasible, so natural sources of random variation are exploited instead. 3) Regression analysis is discussed as a tool for causal inference, but cannot prove causality without random assignment to control for selection bias. 4) The conditional expectation function is presented as a way to decompose a random variable and understand the predictive power of regression even when it cannot prove causation.

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    © All Rights Reserved
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    556 visualizações3 páginas

    Mostly Harmless Econometrics Notes Part 1

    Enviado por

    Liam Donovan
    This document discusses key concepts in causal inference research: 1) It introduces four frequently asked questions (FAQs) about causal research design, including identifying the causal relationship of interest and the ideal experimental method. 2) Randomized experiments are described as the best research design but are often infeasible, so natural sources of random variation are exploited instead. 3) Regression analysis is discussed as a tool for causal inference, but cannot prove causality without random assignment to control for selection bias. 4) The conditional expectation function is presented as a way to decompose a random variable and understand the predictive power of regression even when it cannot prove causation.

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    de 3

    Chapter1:QuestionsaboutQuestions

    4FAQs:

    Whatisthecausalrelationshipofinterest?
    Descriptiveresearchislessinterestingb/citdoesntanswerquestions
    ofbusinessorpolicy
    Whatistheidealexperiment?
    Oftenimpossibletoactuallycarryout
    guidesthestructure/goalsoftheactualexperiment
    Helpdecideonfruitfulresearchtopicsifyoucantsatisfactorilyresolve
    thequestionwithanidealexperiment,itsawasteoftime
    AvoidFUQdquestions(FundamentallyUnidentified
    Questions)
    exampleistheeffectofschoolentrydateoneducational
    outcomesolderkidsdobetterbecausetheyreolder,evenif
    theyendupworseoffatage20
    Whatisyouridentificationstrategy?
    Usedwhendataisnotgeneratedbyarandomizedtrialtoapproximatea
    realexperiment
    Whatisyourmodeofstatisticalinference?
    Datararelycoversthewholepopulationhowdoyouextrapolate?

    Chapter2:TheIdealExperiment
    Randomassignmentisthebestresearchdesign,buttheyreveryexpensive
    Correlationdoesntimplycausationdohospitalsmakepeoplesicker?
    ,y
    isthemeasureofinterest,D
    isthetreatmenteffect(foran
    i
    i
    individual)
    y
    isthebaseoutcomeforthepatient(withoutthetreatment
    0i
    effect)
    y
    y
    isthecausaleffectofthetreatmentfortheindividual
    1i
    0i

    inrealdata,selectionbiasskewsresults
    sickpeoplegotohospitals,healthypeopledont

    randomassignmentgetsridofselectionbias,lettingususetheobserveddifferencein
    outcomesasareliablemeasureofcausality

    However,randomizedtrialsaredifficultandexpensive,somostresearchexploitsnatural
    sourcesofrandomvariation
    Regressionisuseful:
    iftreatmenteffectissameforeverybody:

    =treatmenteffect,=baseoutcome,
    =randomvariationfromE(y
    )
    0i

    selectionbias=correlationbetweentheregressionerror(
    i

    )&theregressor(D
    )
    i
    tofindthetreatmenteffectinarandomexperiment,regre
    ssY
    onD
    i
    i
    Controllingforvariablesreduces
    theresidualvariance,makingtheestimatemoreaccurate

    MakingRegressionMakeSense
    Withoutrandomizedexperiments,regressionjustmakespredictions,cantspeaktocausality
    Predictivepowersummarizedby
    ConditionalExpectationFunction(CEF)
    CEFisthepopulationaverageofY
    whenmultiplecovariatesX
    areheldfixed(E[Y
    |X
    ])
    i
    ki
    i
    i

    f
    istheconditionaldensitydistribution
    y
    thatis,themeanofy
    acrossthepopulationistheunconditional
    i
    expectationoftheCEF(
    lawofiteratedexpectations)

    importanceisthatitbreaksarandomvariableintotwopieces:
    theCEFDecompositionProperty

    ismeanindependentofX
    (
    E[
    |X
    ])
    i
    i
    i
    i

    isthusuncorrelatedwithX
    i
    i

    (usetheCEFDecompositionProperty,thenbreakapartthetermsoftheexpectationfunction
    thesecondtermwillreduceintoE[Y
    |X
    ]bythelawofiteratedexpectations)
    i
    i

    TheCEFPredictionProperty
    saysthattheCEFisthebestpredictorofY
    givenX
    b/cit
    i
    i
    solvesaminimummeansquarederrorpredictionproblem
    formalstatement:

    argmin(f(m(x
    ))=thevalueofm(x
    )forwhichthefunctionf(m(x
    )isminimized
    i
    i
    i

    Proof:varianceofY
    isvarianceofCEF+varianceofresidual
    i
    2
    varianceoftheresidual=E[
    i]asvarianceistheexpectationofthedifferencefromthemean
    (whichis0fortheresidual).

    linearregressionisdonebyfindingtheCEFthatfitsthefollowingfunction

    (X
    b=m(x)fromthegeneralizedCEFequation)
    i
    WhenweassumethattheexpectationoftheerroracrossX
    is0:
    i

    uselessmaterialoutputs
    MSW=refusefrommunicipalities(households,smallbusinesses,institutions)

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