Financial Econometrics Chapter 11.Regression Discontinuity Design Jin Ling School of Finance,Zhongnan University of Economics and Law
Financial Econometrics Chapter 11. Regression Discontinuity Design Jin Ling School of Finance, Zhongnan University of Economics and Law 1
Outline The Discontinuity Design for Causal Inference The Regression Discontinuity Design The Application for Regression Discontinuity Design 2
• The Discontinuity Design for Causal Inference • The Regression Discontinuity Design • The Application for Regression Discontinuity Design 2 Outline
The Discontinuity Design ·The cutoff point: The assignment mechanism. Assignment variable for treatment. The assignment variable meet a specific condition-Treatment. ·Education and wage. 3
• The cutoff point: • The assignment mechanism. • Assignment variable for treatment. • The assignment variable meet a specific condition→Treatment. • Education and wage. 3 The Discontinuity Design
The Discontinuity Design ·A typical example: D:= 若x,≥500 0 若x:<500 ·D,is a function of x Ifx,is given,the D,is independent with the potential outcome. A set of covariates affect x.x,can be regarded as the general characteristic. Can we use PSM to mitigate the confounding bias from the assignment mechanism?
• A typical example: • Di is a function of xi . • If xi is given, the Di is independent with the potential outcome. • A set of covariates affect xi . xi can be regarded as the general characteristic. • Can we use PSM to mitigate the confounding bias from the assignment mechanism? 4 The Discontinuity Design
The Discontinuity Design The cutoff point for causal inference: ·x=498,499,500,501. The difference between treatment group(x,=500,501)and control group (x,=498,499) Randomized factor leads to the difference. Randomized assignment for the range ofx,:[500-8,500 +8] 5
• The cutoff point for causal inference: • xi = 498, 499, 500, 501. • The difference between treatment group (xi = 500, 501) and control group (xi = 498, 499). • Randomized factor leads to the difference. • Randomized assignment for the range of xi : [500 - ε, 500 + ε] 5 The Discontinuity Design