Individual Fixed Effects Precision Enhancement in Panel RCTs
RCTClinical Trial
High baseline variance in weekly individual financial behavior introduces residual noise that reduces statistical power in randomized evaluations of financial tools.
Picture this
Adding individual fixed effects into statistical models subtracts away each participant's unique, permanent personal habits, allowing researchers to evaluate the pure impact of the experimental tool like comparing a runner's time against their own personal average rather than against the entire crowd.
What the evidence says
Including individual fixed effects controlled for baseline individual variation, achieving an adjusted R-squared of 0.010 for weekly remittance probability and 0.012 for the low-baseline remittance subsample, ensuring identification precision across 137,927 panel observations.
- Who was studied
- N = 4,451 Filipino migrant workers in the UAE evaluated over 137,927 weekly observations across 30 weeks.
- How
- Intent-to-treat (ITT) Ordinary Least Squares (OLS) panel regression incorporating individual participant fixed effects and week fixed effects to control for time-invariant individual variation and temporal shocks.
What to do
Incorporate individual participant fixed effects in panel RCT regressions to absorb time-invariant individual heterogeneity and boost statistical precision.
From the source
"Individual fixed effects account for individual-specific time-invariant factors affecting remittances. Because the treatment is randomly assigned, individual fixed effects are not necessary for identification, but they improve precision by reducing residual variation, and also deal with chance imbalances..."
A Field Experiment among Filipino Migrant Workers in the UAE.pdf