UCD Centre for Economic Research Working Paper Series No. WP22/04
University College Dublin, UCD School of Economics, Dublin
Many interesting and important economic questions relate to the e§ects of binary treatments such as starting a college degree or participating in a job training program. The causal e§ects of these treatments are likely to be heterogeneous and recent research has emphasized the estimation of heterogeneous treatment e§ects, with a particular focus on Marginal Treatment E§ects (MTEs). In this note, I describe why common methods of estimating MTEs of binary treatments can be very sensitive to omitted higher powers of covariates and demonstrate this using simple Monte Carlo simulations. I conclude by discussing approaches that may be useful for researchers to address this problem in practice.