Propensity score matching Instrumental variables estimation An example Consider an example where all units are unemployed individuals, and some experience a policy intervention (the treatment group), while others do not (the control group). The causal effect of interest is the impact a job search monitoring policy (the treatment) has on the length of an unemployment spell: On average, how much shorter would one's unemployment be if they experienced the intervention? The ATE, in this case, is the difference in expected values (means) of the treatment and control groups' length of unemployment. A positive ATE, in this example, would suggest that the job policy increased the length of unemployment. A negative ATE would suggest that the job policy decreased the length of unemployment. An ATE estimate equal to zero would suggest that there was no advantage or disadvantage to providing the treatment in terms of the length of unemployment. Determining whether an ATE estimate is distinguishable from zero (either positively or negatively) requires statistical inference. Because the ATE is an estimate of the average effect of the treatment, a positive or negative ATE does not indicate that any particular individual would benefit or be harmed by the treatment. Thus the average treatment effect neglects the distribution of the treatment effect. Some parts of the population might be worse off with the treatment even if the mean effect is positive. Heterogenous treatment effects Some researchers call a treatment effect "heterogenous" if it affects different individuals differently (heterogeneously). For example, perhaps the above treatment of a job search monitoring policy affected men and women differently, or people who live in different states differently. ATE requires a strong assumption known as the stable unit treatment value assumption (SUTVA) which requires the value of the potential outcome be unaffected by the mechanism used to assign the treatment and the treatment exposure of all other individuals. Let be the treatment, the treatment effect for individual is given by . The SUTVA assumption allows us to declare . One way to look for heterogeneous treatment effects is to divide the study data into subgroups (e.g., men and women, or by state), and see if the average treatment effects are different by subgroup. If the average treatment effects are different, SUTVA is violated. A per-subgroup ATE is called a "conditional average treatment effect" (CATE), i.e. the ATE conditioned on membership in the subgroup. CATE can be used as