Re: st: Regression Discontinuity, with treatment effects that vary with an endogenous covariate?

[Austin Nichols <austinnichols@gmail.com>]

The RD design uses the jump in expected benefits at the tenure cutoff
to identify a causal effect at one particular value of tenure; if
there were a jump also in prior earnings at that cutoff, it would
invalidate the design.  So, no, you can't include an interaction.
Also note that Stata has no -rd- command (ssc describe rd).

On Sat, Jul 3, 2010 at 5:13 AM, Jen Zhen <jenzhen99@gmail.com> wrote:
> Dear Statalisters,
>
> I would like to estimate the treatment effect on unemployment duration
> of receiving a lump-sum cash transfer.
> The individuals in my dataset receive some dollar amount iff their
> tenure exceeds some threshold value, so I considered using a
> Regression Discontinuity Design.
>
> One issue though is that the amount is the same regardless of
> individuals' prior monthly earnings, however my intuition tells me
> that, if there is an effect, its size should depend on prior earnings,
> with the effect being larger the more earnings months are being
> replaced by the payment, i.e. the lower prior monthly earnings. Prior
> earnings are of course an endogenous variable.
>
> So I am wondering whether it would make sense to use a RD design, and
> add to the treatment dummy for being above the threshold also an
> interaction of that dummy with prior earnings, so as to allow the
> treatment effect to vary (presumably negatively) with prior wages?
> If so, is there a way to do this using Stata's -rd- command?
>
> Any advice is much appreciated.
>
> Thanks and best regards,
> JZ
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