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Statistical treatment rules for heterogeneous populations

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  • Charles F. Manski

    (Institute for Fiscal Studies and Northwestern University)

Abstract

An important objective of empirical research on treatment response is to provide decision makers with information useful in choosing treatments. Manski (2000, 2002, 2003) showed how identification problems generate ambiguity about the identity of optimal treatment choices. This paper studies treatment choice using sample data. I consider a planner who must choose among alternative statistical treatment rules, these being functions that map observed covariates of population members and sample data on treatment response into a treatment allocation. I study the use of risk (Wald, 1950) to evaluate the performance of alternative rules and, more particularly, the minimax-regret criterion to choose a treatment rule. These concepts may also be used to choose a sample design. Wald's development of statistical decision theory directly confronts the problem of finite-sample inference without recourse to the approximations of asymptotic theory. However, it is computationally challenging to implement. The main original work of this paper is to study implementation using data from a classical randomized experiment. Analysis of a simple problem of evaluation of an innovation yields a concise description of the set of undominated treatment rules and tractable computation of the minimax-regret rule. Analysis of a more complex problem of treatment choice using covariate information yields computable bounds on the maximum regret of alternative conditional empirical success rules, and consequent sufficient sample sizes for the beneficial use of covariate information. Numerical findings indicate that prevailing practices in the use of covariate information in treatment choice are too conservative.

Suggested Citation

  • Charles F. Manski, 2003. "Statistical treatment rules for heterogeneous populations," CeMMAP working papers CWP03/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:03/03
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    File URL: http://cemmap.ifs.org.uk/wps/cwp0303.pdf
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    References listed on IDEAS

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    1. James J. Heckman & Jeffrey Smith & Nancy Clements, 1997. "Making The Most Out Of Programme Evaluations and Social Experiments: Accounting For Heterogeneity in Programme Impacts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 487-535.
    2. Manski, Charles F., 2000. "Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice," Journal of Econometrics, Elsevier, vol. 95(2), pages 415-442, April.
    3. Frank Stafford, 1985. "Income-Maintenance Policy and Work Effort: Learning from Experiments and Labor-Market Studies," NBER Chapters, in: Social Experimentation, pages 95-144, National Bureau of Economic Research, Inc.
    4. Dehejia, Rajeev H., 2005. "Program evaluation as a decision problem," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 141-173.
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