Doubly Robust Inference in Causal Latent Factor Models

This article introduces a new framework for estimating average treatment effects under unobserved confounding in modern data-rich environments featuring large numbers of units and outcomes. The proposed estimator is doubly robust, combining outcome imputation, inverse probability weighting, and a novel cross-fitting procedure for matrix completion. We derive finite-sample and asymptotic guarantees, and show that the error of the new estimator converges to a mean-zero Gaussian distribution at a parametric rate. Simulation results demonstrate the practical relevance of the formal properties of the estimators analyzed in this article.

Estimating the Value of Evidence-Based Decision Making

Business/policy decisions are often based on evidence from randomized experiments and observational studies. In this article we propose an empirical framework to estimate the value of evidence-based decision making (EBDM) and the return on the investment in statistical precision.

The Risk of Machine Learning

Many applied settings in empirical economics involve simultaneous estimation of a large number of parameters. In particular, applied economists are often interested in estimating the effects of many-valued treatments (like teacher effects or location effects), treatment effects for many groups, and prediction models with many regressors. In these settings, machine learning methods that combine regularized estimation and data-driven choices of regularization parameters are useful to avoid over-fitting. In this article, we analyze the performance of a class of machine learning estimators that includes ridge, lasso and pretest in contexts that require simultaneous estimation of many parameters. Our analysis aims to provide guidance to applied researchers on (i) the choice between regularized estimators in practice and (ii) data-driven selection of regularization parameters. To address (i), we characterize the risk (mean squared error) of regularized estimators and derive their relative performance as a function of simple features of the data generating process. To address (ii), we show that data-driven choices of regularization parameters, based on Stein's unbiased risk estimate or on cross-validation, yield estimators with risk uniformly close to the risk attained under the optimal (unfeasible) choice of regularization parameters. We use data from recent examples in the empirical economics literature to illustrate the practical applicability of our results.