Professional Documents
Culture Documents
Opr 196 VS
Opr 196 VS
Quantiles regression
Pauline Givord
CREST, INSEE
2011/2012
Pauline Givord
Quantiles regression
Pauline Givord
CREST, INSEE
2011/2012
Pauline Givord
Introduction
95% of applied econometrics is concerned with averages but many variables (earnings, test scores...) have continuous distributions: they can change in a way not revealed by an examination of averages
Pauline Givord
Quantile Regression
rapidly expanding empirical (and theoretical) quantile regression literature in economics quantile regression: provides a convenient linear framework for examining how the quantiles of a dependent variables change in response to a set of independent variables allows the estimation of linear conditional quantile functions
Pauline Givord
Course Overview
This course : 1. (briey) introduces quantile regression for a more detailed presentation see Buchinsky (1998) and Koenker et Hallock (2002) 2. and discuss some major application(s) to the evaluation framework : quantile treatment eect
Pauline Givord
Denition
For a random variable Y with distribution F (F (y ) = P(Y < y )), th quantile is dened by: QY ( ) = inf {y : F (y ) }. Note that it corresponds to q as P(Y < q) = , or F (q) = , or q = F 1 ( ). Most frequently examined quantiles : median ( = 0.5), rst and last deciles ( = 0.1 and = 0.9), rst and last quartiles ( = 0.25 and = 0.75).
Pauline Givord
Minimization
Helpful to think about quantile as the solution to a minimization problem. simplest case : Median it solves argminb i |Yi b| : Least Absolute Deviation (LAD)
Pauline Givord
Intuition
First order conditions S(y , b) = b with ui = yi b. minimum for b such as we have as many negative and positive residuals. i.e. we have as many yi higher than b as we have yi smaller than b : denition of median. Note that the location of the median depends only on the signs of the residuals (yi b), so robust to outliers
Pauline Givord Evaluation of Public Policies
Check Function
This formula can be generalized to any other quantile : the th sample quantile solves argminb
i:Yi b
|Yi b| +
i:Yi <b
(1 )|Yi b|
or : argminb
(Yi b)
solution to a problem that minimizes the weighted sum of the absolute value of the residuals the weight function is called the check function: (u) = u( 1(u < 0))
Pauline Givord Evaluation of Public Policies
Quantile Regression
We are interested in the conditional distribution according to observable X. e.g. : Quetelets growth chart (distribution of weight/height conditionally on age)
Pauline Givord
Quantile Regression
Motivation : observables X aect the entire shape of the distribution the impact on tail quantile can be very dierent than the impact on the central quantile the quantile regression assumes a linear dependence of the quantile in these observables. quantile regression model replaces the b in the preceding program by a linear function of the covariates we estimate : = arg min (Yi Xi )
Pauline Givord
Estimation
the check function is not dierentiable, so common gradient procedure cannot be used can be written as the solution of linear programming model (Koenker and Bassett, 1978). implementation by stata (qreg, sqreg) or R (rq), sas (quantreg).
Pauline Givord
Results
we could run a quantile regression for each dierent of : QY |X ( ) = X the impact is summarized by the function coecient: i.e. we will get a dierent coecient vector for every value of presentation of results: usually graph of the coecient estimates as a function of the quantiles
Pauline Givord
Pauline Givord
Interpretation
we measure how a quantile of the conditional distribution changes with change in the covariates parameter of interest:
EQY |X ( ) Xj
i.e. marginal change in the th conditional quantile after a marginal change in Xj . if xj is entered linearly, it is just j not individual interpretation: does not imply that a subject in the th quantile of one conditional distribution would still nd himself there with dierent value of X
Pauline Givord
Pauline Givord
Pauline Givord
Pauline Givord
Advantages on OLS
estimate is less sensitive to outliers values of the outcome equivariance to monotone transformation : if h is a monotone function, P(T < t|X ) = P(h(T ) < h(t)|X ) then Qh(Y )|X ( ) = h(QY |X ( )) The mean does not share this property: E (h(Y )|X ) = h(E (Y |X )) useful for censored data (cf Buchinsky, 1998), as the quantiles of the censored conditional quantiles function correspond to the quantiles of the uncensored conditional quantile function
Pauline Givord Evaluation of Public Policies
Denition
Evaluation framework : we are interested in the eect of a binary treatment T on an outcome Y . Let Y0 and Y1 the potential outcomes with and without treatment FY0 and FY1 the corresponding distributions.
Pauline Givord
Horizontal distance between both distributions (Lehmann, 1974 and Doksum, 1974). Similarly, we could dene the restriction to the treated (QTET):
1 1 |T =1 = FY1 |T =1 ( ) FY0 |T =1 ( )
Pauline Givord
Interpretation
without further assumption on the joint distribution of potential outcomes, we estimate the dierence of the quantiles and not the quantile of the dierence (i.e. the treatment eect) Y1 Y0 no individual interpretation : a nding of a treatment eect of at the th quantile says nothing about the treatment eect for the person at the th quantile of the untreated outcome distribution In many applications, this is sucient to answer economically meaningful questions changes in the median, in the lower tails of the distribution, of the Gini coecient... otherwise, need to make assumption on joint distributions
Pauline Givord Evaluation of Public Policies
rank invariance: implies that the treatment does not alter the ranking of the units: If i as Y0i < QY0 ( ), then Y1i < QY1 ( ) when it is not likely to be satised for all observations, Heckman, Smith and Clements (1997) propose bounds for the quantile treatment eect under several assumptions on the ranking
Pauline Givord
Identication
preceding quantile regression methods could be used (we just emphasize the impact of a particular explanatory variable T ) but so far we have (implicitly) ignored potentially endogeneity except in case of experimental data, we have to deal with the same selection eects as usual Extension of the classical identication methods to estimate counterfactual distributions. still ongoing research eld...
Pauline Givord
Identication : CIA
Selection-on-observables model : Firpo (2007), Ecient Semiparametric Estimation of Quantile Treatment Eects, Econometrica, vol. 75(1). 1. Conditional independence assumption (CIA) : Y0 , Y1 T |X with X observable characteristics 2. common support : p(X ) = p(T = 1|X ) ]0, 1[ i.e. matching assumptions
Pauline Givord
we face the same problem as before : usual quantile regressions estimate treatment eect at dierent conditional quantiles but as stated before, it cannot be used to estimate the impact of the treatment on corresponding unconditional quantiles Firpo proposes a (two stages) semi-parametric direct estimation of unconditional quantile treatment eect
Pauline Givord
Identication
Firpo shows that under preceding assumptions the quantile QY1 ( ) could be expressed as an implicit function of the observed (Y , T , X ): T 1(Y QY1 ( )) =E p(X ) in this expression, the only conditional function to estimate is the score p(X ) = P(T = 1|X ).
Pauline Givord
Conditional Quantiles
Similarly, we have: =E 1T 1(Y QY0 ( )) 1 p(X )
and for conditional quantiles QY1 ( |T = 1) and QY0 ( |T = 1): =E and =E T 1(Y QY1 |T =1 ( )) p
with p = P(T = 1)
Pauline Givord Evaluation of Public Policies
Estimation
Two-stages procedure : 1. (non parametric) estimation of p(X ) 2. Estimates of QY1 and QY0 are obtained by a reweighted version of the standard quantile regression procedure: consistent estimators of QYt ( ) (t = 0, 1) are given by: argminb t,i (Yi b) Ti with 1,i = N p(X ) (i.e. sample analogue of T /p(X )) and 0,i =
1Ti N(1(Xi )) . p
Empirical Application
identication of the causal impact of a training program on future earnings Lalonde data set (1986): use bot experimental data set (National Supported Work Program) and observational data set (PSID) see also Dehejia and Whaba (1999): less destructive results than Lalonde for non experimental data, when one correctly corrects for dierences in observables variables in treatment and control groups estimation of the score that balances covariates between treated and control groups
Pauline Givord Evaluation of Public Policies
Pauline Givord
Pauline Givord
Remark
average treatment eect with experimental data : 1794$ average treatment eect with non experimental data , Dehejia et Wabba : 1129$ median treatment eect with non experimental data, Firpo : 1927$ but... very imprecise estimates (not reported here)
Pauline Givord
Pauline Givord
Notation
Random aectation to treatment : Z = 0, 1 treatment T = 0, 1, depends on instrument (denoted by T0 and T1 ) outcome Y depends on treatment Yt (ie Y0 and Y1 ) observable characteristics X
Pauline Givord
Assumptions
1. independence: (Y1 , Y0 , T1 , T0 ) indep of Z cond. X 2. non trivial assignment : 0 < P(Z = 1|X ) < 1 3. rst stage E [T1 |X ] = E [T0 |X ] 4. monotonicity : P(T1 T0 |X ) = 1 (no deers) compliers still dened as individuals who change their treatment status with instrument : T1 > T0 independence of the potential outcome with treatment for compliers: (Y1 , Y0 ) T |X , T1 > T0
Pauline Givord
Estimation of QTEc
Identiable parameter: Q (Y |X , T , T1 > T0 ) = T + X i.e. estimation of the QTE for compliers estimation of ( , ) = argminE ( (Y T X )|T1 > T0 ) Pb: population of compliers is not identied
Pauline Givord
AAD show that we could use the weight function: (T , Z , X ) = 1 with 0 (X ) = P(Z = 1|X ). note that equals 1 if T = Z (Compliers). AAD show that for all function h(Y , T , X ): E [h(Y , T , X )|T1 > T0 ] = 1 E [h(Y , T , X )] P(T1 > T0 ) (1 T )Z T (1 Z ) (1 0 (X )) 0 (X )
Pauline Givord
the could estimate using ( , ) = argminE [ (Y T X )] in practice, pb as could be negative, so they use instead the nonnegative weight = E [|Y , T , X ] = P(T1 > T0 |Y , T , X )
Pauline Givord
Application : JTPA
experimental data Job Training Partnership Act (JTPA) : oer services for individuals facing barriers to employment random assignment (20 000 individuals), but only about 60% of those oered training actually received JTPA note that very few individuals in the control group received JTPA services: less than 2%
Pauline Givord
Application
outcome : 30-months earnings random aectation to treatment gives a valid instrument also control for individual characteristics : race, education, age, recent job, marital status...
not theoretically required as the treatment was randomized, but could improve precision the drawback is that we will obtained conditional quantile estimator : see Froelich et Melly (2008) for unconditional quantile estimator in this context
Pauline Givord
Results
Pauline Givord
Extension of classical evaluation methods to quantile treatment eect estimation : Lamarche (2007) : xed eects to deal with endogeneity bias in a evaluation of the vouchers experiment (Milwaukee). Froelich and Melly (2008) extension to discontinuity regression design Athey et Imbens (2003): application to dierences in dierences. application to duration models : Koenker and Bilias (2002), evaluation of the Bonus Experiment
Pauline Givord