Propensity Score Matching

In the statistical analysis of observational data, propensity score matching (PSM) is a statistical matching technique that attempts to estimate the effect of a treatment, policy, or other intervention by accounting for the covariates that predict receiving the treatment. PSM attempts to reduce the bias due to confounding variables that could be found in an estimate of the treatment effect obtained from simply comparing outcomes among units that received the treatment versus to those that did not. The technique was first published by Paul Rosenbaum and Donald Rubin in 1983, and implements the Rubin causal model for observational studies.

The possibility of bias arises because the apparent difference between these two groups of units may depend on characteristics that affected whether or not a unit received a given treatment instead of due to the effect of the treatment per se. In randomized experiments, the randomization enables unbiased estimation of treatment effects; for each covariate, randomization implies that treatment-groups will be balanced on average, by the law of large numbers. Unfortunately, for observational studies, the assignment of treatments to research subjects is, by definition, not randomized. Matching attempts to mimic randomization by creating a sample of units that received the treatment that is comparable on all observed covariates to a sample of units that did not receive the treatment.

For example, one may be interested to know the consequences of smoking or the consequences of going to university. The people 'treated' are simply those -- the smokers, or the university graduates -- who undergo in course of everyday life whatever it is that is being studied by the researcher. In both of these cases it is unfeasible (and perhaps unethical) to randomly assign people to smoking or a university education, so observational studies are required. The treatment effect estimated by simply comparing a particular outcome -- rate of cancer or life time earnings -- between those who smoked and did not smoke or attended university and did not attend university would be biased by any factors that predict smoking or university attendance, respectively. PSM attempts to control for these differences to make the groups receiving treatment and not-treatment more comparable.