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

Tadao Hoshino

Journal of Business & Economic Statistics, 2024, vol. 42, issue 2, 591-602

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.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jnlbes:v:42:y:2024:i:2:p:591-602

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DOI: 10.1080/07350015.2023.2207617

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