Chapter 9 discussed situations in which it is dangerous to use a standard linear regression of outcome on predictors and an indicator variable for estimating causal effects: when there is imbalance or lack of complete overlap or when ignorability is in doubt. This chapter discusses these issues in more detail and provides potential solutions for each.

Imbalance and lack of complete overlap

In a study comparing two treatments (which we typically label “treatment” and “control”), causal inferences are cleanest if the units receiving the treatment are comparable to those receiving the control. Until Section 10.5, we shall restrict ourselves to ignorable models, which means that we only need to consider observed pre-treatment predictors when considering comparability.

For ignorable models, we consider two sorts of departures from comparability—imbalance and lack of complete overlap. Imbalance occurs if the distributions of relevant pre-treatment variables differ for the treatment and control groups. Lack of complete overlap occurs if there are regions in the space of relevant pre-treatment variables where there are treated units but no controls, or controls but no treated units.

Imbalance and lack of complete overlap are issues for causal inference largely because they force us to rely more heavily on model specification and less on direct support from the data.