Econometrics: When Everybody is Different

Nowadays everybody is talking about heterogeneous treatment effects. That is, response to an economic stimulus that varies across individuals in a population. However, so far the discussion was concentrated on the instrumental variable setting where a randomized (natural or administered) experiment affects the treatment status of a so-called complier population. An average of the individual treatment effects can only be estimated for this group of compliers. Instead, for the always and never-takers we cannot say anything. But if individual treatment responses are different for everybody in the population, how can we be sure that what we’re estimating for the compliers is representative for the whole population? Continue reading Econometrics: When Everybody is Different