Average treatment effect estimation via random recursive partitioning

Abstract

A new matching method is proposed for the estimation of the average treatment effect of social policy interventions (e.g., training programs or health care measures). Given an outcome variable, a treatment and a set of pre-treatment covariates, the method is based on the examination of random recursive partitions of the space of covariates using regression trees. A regression tree is grown either on the treated or on the untreated individuals {\it only} using as response variable a random permutation of the indexes 1...$n$ ($n$ being the number of units involved), while the indexes for the other group are predicted using this tree. The procedure is replicated in order to rule out the effect of specific permutations. The average treatment effect is estimated in each tree by matching treated and untreated in the same terminal nodes. The final estimator of the average treatment effect is obtained by averaging on all the trees grown. The method does not require any specific model assumption apart from the tree's complexity, which does not affect the estimator though. We show that this method is either an instrument to check whether two samples can be matched (by any method) and, when this is feasible, to obtain reliable estimates of the average treatment effect. We further propose a graphical tool to inspect the quality of the match. The method has been applied to the National Supported Work Demonstration data, previously analyzed by Lalonde (1986) and others.