Estimating Person-Centered Treatment (PeT) Effects Using Instrumental Variables

Anirban Basu

NBER Working Paper No. 18056
Issued in May 2012
NBER Program(s):   HC   HE   TWP

This paper builds on the methods of local instrumental variables developed by Heckman and Vytlacil (1999, 2001, 2005) to estimate person-centered treatment (PeT) effects that are conditioned on the person’s observed characteristics and averaged over the potential conditional distribution of unobserved characteristics that lead them to their observed treatment choices. PeT effects are more individualized than conditional treatment effects from a randomized setting with the same observed characteristics. PeT effects can be easily aggregated to construct any of the mean treatment effect parameters and, more importantly, are well-suited to comprehend individual-level treatment effect heterogeneity. The paper presents the theory behind PeT effects, studies their finite-sample properties using simulations and presents a novel analysis of treatment evaluation in health care.

(618 K)

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This paper was revised on July 3, 2012

Acknowledgments

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