A Sensitivity Approach to Causal Inference Under Limited Overlap

Observational data is widely utilized when randomized experiments are infeasible or fail to adequately represent target populations. A key challenge in observational analysis is the lack of overlap between treatment and control groups. Even when a nominally large dataset is collected, the effective sample size may be prohibitively small when there is a region with little overlap between treated and control populations. As an example, if the treatment of interest is rarely observed among older citizens, estimating their counterfactual (treated) outcome becomes inherently unreliable. This challenge is further exacerbated in modern operational contexts, where high-dimensional covariate representations [15] increase data sparsity, making causal identification particularly difficult in regions of the covariate space with small effective sample size.