American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Treatment Effects in Market Equilibrium
American Economic Review
(pp. 3273–3321)
Abstract
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.Citation
Munro, Evan, Xu Kuang, and Stefan Wager. 2025. "Treatment Effects in Market Equilibrium." American Economic Review 115 (10): 3273–3321. DOI: 10.1257/aer.20230039Additional Materials
JEL Classification
- C21 Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
- C51 Model Construction and Estimation
- I32 Measurement and Analysis of Poverty
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration