Treatment Effects in Market Equilibrium
Evan Munro, Xu Kuang, Stefan Wager
American Economic Review · 2025 · Volume 115 · Issue 10
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.
Keywords
Single Equation Models, Single Variables: Cross-Sectional Models, Spatial Models, Treatment Effect Models, Quantile Regressions, Model Construction and Estimation, Measurement and Analysis of Poverty, Welfare, Well-Being, and Poverty: Government Programs, Provision and Effects of Welfare Programs, Economic Development: Human Resources, Human Development, Income Distribution, Migration
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