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Treatment Effects in Market Equilibrium

Evan Munro¹; Xu Kuang²; Stefan Wager²

¹ University of Chicago Booth School of Business · ² Stanford Graduate School of Business (email: )

Policy-relevant treatment effect estimation in a marketplace setting requires assessing both the direct treatment benefit and spillovers induced by changes to the market equilibrium. We show how to identify and estimate policy-relevant treatment effects using a unit-randomized trial run within a single large market. A Bernoulli-randomized trial allows consistent estimation of direct effects and of treatment-heterogeneity measures that enable welfare-improving targeting. Estimating spillovers—and providing confidence intervals for the direct effect—requires estimates of price elasticities, which we provide using an augmented experimental design. We illustrate our results using a simulation calibrated to a conditional cash-transfer experiment in the Philippines. (JEL C21, C51, I32, I38, O15)

DOI

10.1257/aer.20230039

Volume

115 (10)

Pages

3273-3321

Language

en

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BibTeX

Sources

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