The gold standard for drawing inferences about the effect of a policy is a randomized controlled experiment. However, in many cases, experiments remain difficult or impossible to implement, for financial, political, or ethical reasons, or because the population of interest is too small. For example, it would be unethical to prevent potential students from attending college in order to study the causal effect of college attendance on labor market experiences, and politically infeasible to study the effect of the minimum wage by randomly assigning minimum wage policies to states. Thus, a large share of the empirical work in economics about policy questions relies on observational data-that is, data where policies were determined in a way other than through random assignment. Drawing inferences about the causal effect of a policy from observational data is quite challenging. To understand the challenges, consider the example of the minimum wage. A naive analysis of the observational data might compare the average employment level of states with a high minimum wage to that of states with a low minimum wage. This difference is surely not a credible estimate of the causal effect of a higher minimum wage, defined as the change in employment that would occur if the low-wage states raised their minimum wage. For example, it might be the case that states with higher costs of living, as well as more price-insensitive consumers, choose higher levels of the minimum wage