Conditioning on a Confounder (Research Design)

Continuing with the DGP that you created in exercise 1, we will explore different ways of conditioning to reduce bias. To do this, we need to start by making quartiles based on ability.

• Create quartiles based on ability using xtile and call the variable ability_q4
• Add value labels so output is easy to read:

    label           define abilityq4 1 "lowest ability" 2 "low" ///
                        3 "high" 4 "highest ability"
    label           values ability_q4 abilityq4
    label           var ability_q4 "ability quartile"

1. Compare wages within quartiles using sum. What is mean wages for each quartile? 2. Using quartile 2 and conditioning on train, what is the conditional mean? How does it compare in size to the true causal effect? 3. Create a simple bar chart of conditional means in that quartile.