What is the counterfactual of interest

Reference no: EM132172636

Question - Suppose you have been hired by a pharmaceudical company to consult on a randomized control trial (RCT) to test a new drug's effectiveness at reducing heart disease. The RCT will randomize subjects into two groups: a treatment group, which gets the new drug, and a control group, which gets a placebo pill. The goal is to test the fraction of subjects who have a heart attack in the 2 years following the RCT start date. Suppose you specify a linear regression model, where X = 1 if the person receives the treatment drug, and X = 0 otherwise. And suppose Y = 1 if the person experiences a heart attack over the 2 year period, and Y = 0 if not:

Y = β₀ + β₁X + U

(a) What is the counterfactual of interest?

(b) Is the causal interpretation of β₁ justified? How should we interpret U?

(d) Suppose a state senator goes to the floor of the unicameral legislature and argues that drug trials should no longer be randomized. He argues that patients with heart disease need to be able to seek new treatments and will have more heart attacks if they are in the control group; hence RCTs are inherently unfair. Is the assumption E[XU] = 0 valid? How should we interpret β₁ under the proposed non-randomized setting, where we get volunteers for X = 1 and X = 0? How would you respond to the state senator's proposal?

Reference no: EM132172636

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