Understanding Propensity Score Matching

Propensity Score Matching (PSM) is a technique that reduces selection bias. How? Simple – by ensuring that treated and untreated groups are comparable in observed characteristics. Consider a study that involves evaluating the effect of a job training program on employment rates. Without PSM, the treatment group might consist of younger, highly motivated individuals with some college education, while the control group includes older, less motivated individuals with only a high school education. This selection bias could lead to an overestimation of the program’s effectiveness. However, by using PSM, researchers can calculate propensity scores based on characteristics such as age, motivation, and education level, then match treated individuals with similar untreated counterparts. This approach ensures that both groups are comparable, allowing for a more accurate estimation of the job training program’s true impact on employment...