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Entropy Balancing for Continuous Treatments

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  • Stefan Tübbicke

    (University of Potsdam)

Abstract

Interest in evaluating the effects of continuous treatments has been on the rise recently. To facilitate the estimation of causal effects in this setting, the present paper introduces entropy balancing for continuous treatments (EBCT) by extending the original entropy balancing methodology of Hainmüller (2012). In order to estimate balancing weights, the proposed approach solves a globally convex constrained optimization problem, allowing for much more computationally efficient implementation compared to other available methods. EBCT weights reliably eradicate Pearson correlations between covariates and the continuous treatment variable. This is the case even when other methods based on the generalized propensity score tend to yield insufficient balance due to strong selection into different treatment intensities. Moreover, the optimization procedure is more successful in avoiding extreme weights attached to a single unit. Extensive Monte-Carlo simulations show that treatment effect estimates using EBCT display similar or lower bias and uniformly lower root mean squared error. These properties make EBCT an attractive method for the evaluation of continuous treatments. Software implementation is available for Stata and R.

Suggested Citation

  • Stefan Tübbicke, 2020. "Entropy Balancing for Continuous Treatments," CEPA Discussion Papers 21, Center for Economic Policy Analysis.
    • Handle: RePEc:pot:cepadp:21
    DOI: 10.25932/publishup-47895
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    More about this item

    Keywords

    Balancing weights; Continuous Treatment; Monte-Carlo simulation; Observational studies;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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