Estimation Based on Nearest Neighbor Matching: From Density Ratio to Average Treatment Effect

Nearest neighbor (NN) matching is widely used in observational studies for causal effects. Abadie and Imbens (2006) provided the first large‐sample analysis of NN matching. Their theory focuses on the case with the number of NNs, M fixed. We reveal something new out of their study and show that once allowing M to diverge with the sample size an intrinsic statistic in their analysis constitutes a consistent estimator of the density ratio with regard to covariates across the treated and control groups. Consequently, with a diverging M, the NN matching with Abadie and Imbens' (2011) bias correction yields a doubly robust estimator of the average treatment effect and is semiparametrically efficient if the density functions are sufficiently smooth and the outcome model is consistently estimated. It can thus be viewed as a precursor of the double machine learning estimators.