Randomization Tests in Observational Studies With Staggered Adoption of Treatment

Abstract

ABSTRACT This article considers the problem of inference in observational studies with time-varying adoption of treatment. In addition to an unconfoundedness assumption that the potential outcomes are independent of the times at which units adopt treatment conditional on the units’ observed characteristics, our analysis assumes that the time at which each unit adopts treatment follows a Cox proportional hazards model. This assumption permits the time at which each unit adopts treatment to depend on the observed characteristics of the unit, but imposes the restriction that the probability of multiple units adopting treatment at the same time is zero. In this context, we study randomization tests of a null hypothesis that specifies that there is no treatment effect for all units and all time periods in a distributional sense. We first show that an infeasible test that treats the parameters of the Cox model as known has rejection probability under the null hypothesis no greater than the nominal level in finite samples. Since these parameters are unknown in practice, this result motivates a feasible test that replaces these parameters with consistent estimators. While the resulting test does not need to have the same finite-sample validity as the infeasible test, we show that it has limiting rejection probability under the null hypothesis no greater than the nominal level. In a simulation study, we examine the practical relevance of our theoretical results, including robustness to misspecification of the model for the time at which each unit adopts treatment. Finally, we provide an empirical application of our methodology using the synthetic control-based test statistic and tobacco legislation data found in Abadie, Diamond and Hainmueller. Supplementary materials for this article are available online.