Interpreting OLS Estimands When Treatment Effects Are Heterogeneous: Smaller Groups Get Larger Weights

A-Tier
Journal: Review of Economics and Statistics
Year: 2022
Volume: 104
Issue: 3
Pages: 501-509

Score contribution per author:

4.022 = (α=2.01 / 1 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Applied work often studies the effect of a binary variable ("treatment") using linear models with additive effects. I study the interpretation of the OLS estimands in such models when treatment effects are heterogeneous. I show that the treatment coefficient is a convex combination of two parameters, which under certain conditions can be interpreted as the average treatment effects on the treated and untreated. The weights on these parameters are inversely related to the proportion of observations in each group. Reliance on these implicit weights can have serious consequences for applied work, as I illustrate with two well-known applications. I develop simple diagnostic tools that empirical researchers can use to avoid potential biases. Software for implementing these methods is available in R and Stata. In an important special case, my diagnostics require only the knowledge of the proportion of treated units.

Technical Details

RePEc Handle
repec:tpr:restat:v:104:y:2022:i:3:p:501-509
Journal Field
General
Author Count
1
Added to Database
2026-01-29