Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189730
Year of Publication: 
2017
Series/Report no.: 
cemmap working paper No. CWP25/17
Publisher: 
Centre for Microdata Methods and Practice (cemmap), London
Abstract: 
This paper studies inference for the average treatment effect in randomized controlled trials with covariate-adaptive randomization. Here, by covariate-adaptive randomization, we mean randomization schemes that first stratify according to baseline covariates and then assign treatment status so as to achieve "balance" within each stratum. Our main requirement is that the randomization scheme assigns treatment status within each stratum so that the fraction of units being assigned to treatment within each stratum has a well behaved distribution centered around a proportion Û as the sample size tends to infinity. Such schemes include, for example, Efron's biased-coin design and stratified block randomization. When testing the null hypothesis that the average treatment effect equals a pre-specified value in such settings, we first show the usual two-sample t-test is conservative in the sense that it has limiting rejection probability under the null hypothesis no greater than and typically strictly less than the nominal level. We show, however, that a simple adjustment to the usual standard error of the two-sample t-test leads to a test that is exact in the sense that its limiting rejection probability under the null hypothesis equals the nominal level. Next, we consider the usual t-test (on the coefficient on treatment assignment) in a linear regression of outcomes on treatment assignment and indicators for each of the strata. We show that this test is exact for the important special case of randomization schemes with Û = 1/2 , but is otherwise conservative. We again provide a simple adjustment to the standard error that yields an exact test more generally. Finally, we study the behavior of a modified version of a permutation test, which we refer to as the covariate-adaptive permutation test, that only permutes treatment status for units within the same stratum. When applied to the usual two-sample t-statistic, we show that this test is exact for randomization schemes with Û = 1/2 and that additionally achieve what we refer to as "strong balance." For randomization schemes with Û Æ 1/2 , this test may have limiting rejection probability under the null hypothesis strictly greater than the nominal level. When applied to a suitably adjusted version of the two-sample t-statistic, however, we show that this test is exact for all randomization schemes that achieve "strong balance," including those with Û Æ 1/2 . A simulation study confirms the practical relevance of our theoretical results. We conclude with recommendations for empirical practice and an empirical illustration.
Subjects: 
Covariate-adaptive randomization
stratified block randomization
Efron's biased-coin design
treatment assignment
randomized controlled trial
permutation test
two-sample t-test
strata fixed effects
JEL: 
C12
C14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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