Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score

We are interested in estimating the average effect of a binary treatment on a scalar outcome. If assignment to the treatment is exogenous or unconfounded, that is, independent of the potential outcomes given covariates, biases associated with simple treatment-control average comparisons can be removed by adjusting for differences in the covariates. Rosenbaum and Rubin (1983) show that adjusting solely for differences between treated and control units in the propensity score removes all biases associated with differences in covariates. Although adjusting for differences in the propensity score removes all the bias, this can come at the expense of efficiency, as shown by Hahn (1998), Heckman, Ichimura, and Todd…