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Nonparametric Identification and Estimation of Spatial Treatment Effect Boundaries: Evidence from 42 Million Pollution Observations

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  • Kikuchi, Tatsuru

Abstract

This paper develops a nonparametric framework for identifying and estimating spatial boundaries of treatment effects in settings with geographic spillovers. While atmospheric dispersion theory predicts exponential decay of pollution under idealized assumptions, these assumptions—steady winds, homogeneous atmospheres, flat terrain—are systematically violated in practice. I establish nonparametric identification of spatial boundaries under weak smoothness and monotonicity conditions, propose a kernel-based estimator with data-driven bandwidth selection, and derive asymptotic theory for inference. Using 42 million satellite observations of NO$_2$ concentrations near coal plants (2019-2021), I find that nonparametric kernel regression reduces prediction errors by 1.0 percentage point on average compared to parametric exponential decay assumptions, with largest improvements at policy-relevant distances: 2.8 percentage points at 10 km (near-source impacts) and 3.7 percentage points at 100 km (long-range transport). Parametric methods systematically underestimate near-source concentrations while overestimating long-range decay. The COVID-19 pandemic provides a natural experiment validating the framework's temporal sensitivity: NO$_2$ concentrations dropped 4.6\% in 2020, then recovered 5.7\% in 2021. These results demonstrate that flexible, data-driven spatial methods substantially outperform restrictive parametric assumptions in environmental policy applications.

Suggested Citation

  • Kikuchi, Tatsuru, 2025. "Nonparametric Identification and Estimation of Spatial Treatment Effect Boundaries: Evidence from 42 Million Pollution Observations," MPRA Paper 126731, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126731
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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