Lecture 23 Comparison Groups Practice

Nick Huntington-Klein

March 20, 2019

Recap

  • We’ve been going over ways in which we can isolate causal effects
  • We can select similar control groups using matching or controlling (what economists call “selection on observables”)
  • We can use a group at a different time as its own control with fixed effects
  • Or, “natural experiments”:
  • When a treatment is applied at a particular time, we can select a reasonable control to account for the effects of time using difference-in-difference
  • When the treatment is assigned according to a cutoff in a running variable, we can use regression discontinuity

Today

  • We’re going to be trying to apply these methods
  • Given a real-world causal statement, how can we go about selecting a method?
  • We can follow the steps we’ve been taking all along!

Our Approach

  1. Consider the problem
  2. Think about what we think the data-generating process is
  3. Draw a diagram
  4. Figure out the method (we may have to control for some things for the usable diagram to emerge!)
  5. Actually implement the method

Think about the Data-Generating Process

  • Our example from last time was corporate social responsibility
  • We think that CSR might affect stock prices, and we know that CSR resolutions are taken up by winning vote
  • Of course, the vote share might be related to a million different things about the company, or about the company at that time

Draw a Diagram

  • comp is “company”, c.t is company at a particular time