Estimating a Continuous Treatment Model with Spillovers: A Control Function Approach

Tadao Hoshino

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arXiv · 2112.15114

Estimating a Continuous Treatment Model with Spillovers: A Control Function Approach

Tadao Hoshino

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Abstract

We study a continuous treatment effect model in the presence of treatment spillovers through social networks. We assume that one's outcome is affected not only by his/her own treatment but also by a (weighted) average of his/her neighbors' treatments, both of which are treated as endogenous variables. Using a control function approach with appropriate instrumental variables, we show that the conditional mean potential outcome can be nonparametrically identified. We also consider a more empirically tractable semiparametric model and develop a three-step estimation procedure for this model. As an empirical illustration, we investigate the causal effect of the regional unemployment rate on the crime rate.

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Tadao Hoshino. 2021-12-30. Estimating a Continuous Treatment Model with Spillovers: A Control Function Approach. https://arxiv.org/abs/2112.15114

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