Covariate balancing PS applied to female labor force supply


The aim of the project is develop a new estimator to analyze the case of a universal policy intervention when control groups are unavailable. The estimator will be applied to quantify the effect of child support instrument on the labor supply of men and women. We will verify a hypothesis that monetary non-equivalent transfer reduces the labor supply of the second earner in a household, ceteris paribus. We will separate between the effects on the breadwinner and the second earner in the aftermath of the large family transfer program in Poland. Since in Poland second earner is typically a woman, we will also compare the labor supply reaction of married women and single earner households with woman as a head of the household.

This project combines applied labor economics with theoretical econometrics. The estimation of the effects of the unconditional non-equivalent transfer program program on labor supply falls into the category of program evaluation econometrics, but most of the estimators require a valid control group. We propose to apply a novel approach: a difference-in-difference (DID) estimator with weights derived from the Covariate Balancing Propensity Score (CBPS) estimator by Imai and Ratkovic (2014). The strategy based on DID exploits the quasi-natural experiment character of program, whereas the weighting scheme based on CBPS will assure proper adjustment of the control group to the treated group. Utilizing data for Poland (labor force survey and household budget survey) we will estimate a range of local treatment effects, to provide reliable boundaries for the total effect.

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Źródło finansowania | financingNarodowe Centrum Nauki, PRELUDIUM 12

Projekt realizowany | Timeline: 03/2017 – 03/2020

Budżet łączny | Total budget: 101 997 zł

  • wynagrodzenia dla podstawowych wykonawców | compensation to researchers: 36 000 zł
  • komputery i oprogramowanie | hardware and software: 7 700 zł
  • konferencje i inne wyjazdy | conferences: 24 900 zł
  • Dane |  Data: 9 000 zł
  • książki | books: 2 880 zł
  • materiały | consumables: 2 880 zł
  • koszty pośrednie dla FAME | overheads for FAME: 15 716 zł

Our research proposal consists of two important contributions. First, methodological, we propose a novel way to estimate the causal effect of policy instrument, in a situation, when the instrument design invalidates other estimation methods. Second, this novel estimator will be applied to provide an evaluation of the large scale policy instrument in Poland, effects of child support instrument on household labor supply. Additionally, will develop a statistical package for CBPS in Stata environment. The package will be distributed free of charge on the project website and on user forums. As the CBPS method serves for calculation of covariate balancing propensity score in any context, the scope of potential usage is very broad.

Since the seminal paper of Rosenbaum and Rubin, propensity score (PS) has played a significant role in the causal inference framework. It aims to indicate similar units that will be matched or to provide appropriate weights. PS has gained its great popularity by dramatically reducing dimensionality in estimation. Further development of related methods has turned the attention of researchers to the dual nature of PS as a covariate balancing score and conditional probability of treatment assignment. Imai and Ratkovic (2014) exploit the aforementioned duality by deriving a set of appropriate moment conditions and thereby introduce a PS estimator that optimizes the covariate balance—covariate balancing propensity score (CBPS). The paper introduces a new Stata user-written function CBPS that implements the CBPS method within a generalized method of moments framework. The short description of the estimator and the function is presented. Additionally, an empirical exercise that concerns a relationship between a woman's fertility and her labor supply using the exogenous variation due to twin births (Rosenzweig and Wolpin 1980; Angrist and Evans 1998) is provided. The paper also compares the CBPS method with classical PS estimators in unfavorable data environment of a high degree of heterogeneity among women, low fraction of twin births, and exogeneity of the treatment variable with respect to covariates. Moreover, to my knowledge, this is the first paper that concerns the labor supply of Polish women using the first-birth twins identification strategy.

Read the background paper here

Download codes here

See our presentation here