Shrinkage Bayesian Causal Forest with Instrumental Variable
Lennard Maßmann, Jens Klenke
Abstract
Discovering interpretable subgroups whose complier effects deviate from the average is a central goal of instrumental variable analysis under imperfect compliance, yet existing tree-based methods degrade when most covariates are irrelevant to the effect. We propose Shrinkage Bayesian Causal Forest with Instrumental Variable (SBCF-IV) for discovering and estimating subgroups with heterogeneous Complier Average Causal Effects (CACE) in sparse high-dimensional settings. SBCF-IV places a sparsity-inducing Dirichlet prior on the splitting probabilities of the Bayesian Additive Regression Trees that estimate the conditional intention-to-treat and the complier share, concentrating posterior mass on the few covariates that moderate the complier effect and thereby regularizing effect estimation. The posterior split frequencies additionally enter a downstream CART as variable-level costs that steer the partition toward relevant moderators, providing an interpretable division of the covariate space. Monte Carlo experiments show that, as the share of irrelevant covariates grows, SBCF-IV recovers the true partition more reliably than its non-sparse predecessor BCF-IV at the tree and unit level, and retains nominal coverage where BCF-IV's intervals deteriorate. We apply the method to the Oregon Health Insurance Experiment and the 401(k) eligibility data.
Create a lesson
Related papers
Conditionally linear, matrix normal state space models
Drew D. Creal, Marcelo C. Medeiros, Rodrigo Sarlo
Policy Targeting with Market Equilibrium
Gyungbae Park
What No First Stage Can Detect: Functional-Form Contamination in Linear IV
Parush Arora
Tensor-BEKK: Conditional Covariance Modeling and Inference for Tensor-Valued Time Series
Huan Gong, Feiyu Jiang
Profiled Anderson--Rubin Test: Robust Inference Allowing for Direct Effects of Instruments
Jung Hyub Lee
Structural Complexity of One-Factor Sparse Portfolio Selection: Exact Algorithms, Parameterized Hardness, and Restricted Circuit Lower Bounds
Davit Gondauri