A Framework for Separating Individual Treatment Effects from Spillover, Interaction, and General Equilibrium Effects
42 Pages Posted: 3 Apr 2017
This paper suggests a causal framework for disentangling individual level treatment effects and interference effects, i.e., general equilibrium, spillover, or interaction effects related to treatment distribution. Thus, the framework allows for a relaxation of the Stable Unit Treatment Value Assumption (SUTVA), which assumes away any form of treatment-dependent interference between study participants. Instead, we permit interference effects within aggregate units, for example, regions or local labor markets, but need to rule out interference effects between these aggregate units.Borrowing notation from the causal mediation literature, we define a range of policy-relevant effects and formally discuss identification based on randomization, selection on observables, and difference-in-differences. We also present an application to a policy intervention extending unemployment benefit durations in selected regions of Austria that arguably affected ineligibles in treated regions through general equilibrium effects in local labor markets.
Keywords: treatment effect, general equilibrium effects, spillover effects, interaction effects, interference effects, inverse probability weighting, propensity score, mediation analysis, difference-in-differences
JEL Classification: C21, C31
Suggested Citation: Suggested Citation