Inverse regression for causal inference with multiple outcomes

Abstract: With multiple outcomes in empirical research, a common strategy is to define a composite outcome as a weighted average of the original outcomes. However, the choices of weights are often subjective and can be controversial. We propose an inverse regression strategy for causal inference with multiple outcomes. The key idea is to regress the treatment on the outcomes, which is the inverse of the standard regression of the outcomes on the treatment. Although this strategy is simple and even counterintuitive, it has several advantages. First, testing for zero coefficients of the outcomes is equivalent to testing for the null hypothesis of zero effects, even though the inverse regression is deemed misspecified. Second, the coefficients of the outcomes provide a data-driven choice of the weights for defining a composite outcome. We also discuss the associated inference issues. Third, this strategy is applicable to general study designs. We illustrate the theory in both randomized experiments and observational studies.