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A Note on the Common Support Problem in Applied Evaluation Studies

This paper advocates the use of a nonparametric bounds analysis to check the robustness of the results of applied evaluation studies to the problem of a lack of common support. The typical responses by researchers of either ignoring it, or obtaining estimates only for the subpopulation within the common support, can both be misleading: Ignoring the problem may result in biases because the comparison group may not be comparable. Deleting observations at best yields an estimator that is consistent for the common support only. When treatment effects differ inside and outside the common support this estimator is inconsistent for the parameter of interest. Furthermore, useful information is ignored, because, for example, the response of the treated to the treatment can be estimated even outside the common support. This information can be used to derive bounds with widths depending on the configuration of the data. The application to an evaluation study of Swiss active labour market policies shows that the relevance of the bounds for changing the interpretation of the results depends very much on the particular data configuration.