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Who Should Be Treated? Empirical Welfare Maximization Methods for Treatment Choice

Kitagawa, T; Tetenov, A; (2018) Who Should Be Treated? Empirical Welfare Maximization Methods for Treatment Choice. Econometrica , 86 (2) pp. 591-616. 10.3982/ECTA13288. Green open access

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Abstract

One of the main objectives of empirical analysis of experiments and quasiexperiments is to inform policy decisions that determine the allocation of treatments to individuals with different observable covariates. We study the properties and implementation of the Empirical Welfare Maximization (EWM) method, which estimates a treatment assignment policy by maximizing the sample analog of average social welfare over a class of candidate treatment policies. The EWM approach is attractive in terms of both statistical performance and practical implementation in realistic settings of policy design. Common features of these settings include: (i) feasible treatment assignment rules are constrained exogenously for ethical, legislative, or political reasons, (ii) a policy maker wants a simple treatment assignment rule based on one or more eligibility scores in order to reduce the dimensionality of individual observable characteristics, and/or (iii) the proportion of individuals who can receive the treatment is a priori limited due to a budget or a capacity constraint. We show that when the propensity score is known, the average social welfare attained by EWM rules converges at least at n−1/2 rate to the maximum obtainable welfare uniformly over a minimally constrained class of data distributions, and this uniform convergence rate is minimax optimal. We examine how the uniform convergence rate depends on the richness of the class of candidate decision rules, the distribution of conditional treatment effects, and the lack of knowledge of the propensity score. We offer easily implementable algorithms for computing the EWM rule and an application using experimental data from the National JTPA Study.

Type: Article
Title: Who Should Be Treated? Empirical Welfare Maximization Methods for Treatment Choice
Open access status: An open access version is available from UCL Discovery
DOI: 10.3982/ECTA13288
Publisher version: http://dx.doi.org/10.3982/ECTA13288
Language: English
Additional information: The copyright to this article is held by the Econometric Society, http://www.econometricsociety.org/. It may be downloaded, printed and reproduced only for personal or classroom use. Absolutely no downloading or copying may be done for, or on behalf of, any for-profit commercial firm or for other commercial purpose without the explicit permission of the Econometric Society. For this purpose, contact the Editorial Office of the Econometric Society ateconometrica@econometricsociety.org
Keywords: Heterogeneous treatment effects, randomized experiments, program evaluation, individualized treatment rules, empirical risk minimization, risk bounds.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/10038909
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