Mean-Squared-Error Calculations for Average Treatment Effects

Mean-Squared-Error Calculations for Average Treatment Effects

By Guido W. Imbens, Whitney K. Newey, Geert Ridder
January 4,2007Working Paper No. 3777

This paper develops a new nonparametric series estimator for the average treatment effect for the case with unconfounded treatment assignment, that is, where selection for treatment is on observables. The new estimator is efficient. In addition we develop an optimal procedure for choosing the smoothing parameter, the number of terms in the series by minimizing the mean squared error (MSE). The new estimator is linear in the first-stage nonparametric estimator. This simplifies the derivation of the MSE of the estimator as a function of the number of basis functions that is used in the first stage nonparametric regression. We propose an estimator for the MSE and show that in large samples minimization of this estimator is equivalent to minimization of the population MSE.