| Abstract: | In an effort to detect hidden biases due to failure to control for an unobserved covariate, some observational or nonrandomized studies include two control groups selected to systematically vary the unobserved covariate. Comparisons of the treated group and two control groups must, of course, control for imbalances in observed covariates. Using the three groups, we form pairs optimally matched for observed covariates—that is, we optimally construct from observational data an incomplete block design. The incomplete block design may use all available data, or it may use data selectively to produce a balanced incomplete block design, or it may be the basis for constructing a matched sample when expensive outcome information is to be collected only for sampled individuals. The problem of optimal pair matching with two control groups is shown by a series of transformations to be equivalent to a particular form of optimal nonbipartite matching, a problem for which polynomial time algorithms exist. In our examples, we implement the procedure using a nonbipartite matching algorithm due to Derigs. We illustrate the method with data from an observational study of the employment effects of the minimum wage. |
