C1. The Potential Outcomes Framework

Question 1

What are the observed data?

Answer 1

An outcome variable, Y

A treatment variable, D

Question 2

How do we denote treatment?

Answer 2

It’s binary so: D = 1 means treatment is recieved, D = 0 means it is not.

Question 3

What are the two potential outcomes?

Answer 3

• Y* (0): the oucome under no treatment
• Y* (1): the outcome under treatment

Question 4

What is the causal effect of treatment?

Answer 4

The difference between potential outcomes based on whether treatment was received:

Y(1) - Y(0)

Question 5

What is the Average Treatement Effect (ATE) formula?

Answer 5

Question 6

How do we get the values for the ATE formula?

Answer 6

Question 7

What is the Average effect Treatment on the Treated (ATT) formula?

Answer 7

Question 8

How do we get values for the ATT formula?

Answer 8

Question 9

How is the observed outcome linked to potential outcomes?

Answer 9

Question 10

What will we actually observe?

Answer 10

Everyone has two potential outcomes, we never observe both- only one or the other.

The unobserved potential outcome is known as the “counterfactual”.