The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Treatment Effect

  • Joshua D. Angrist
Reference work entry


The term ‘treatment effect’ refers to the causal effect of a binary (0–1) variable on an outcome variable of scientific or policy interest. Economics examples include the effects of government programmes and policies, such as those that subsidize training for disadvantaged workers, and the effects of individual choices like college attendance. The principal econometric problem in the estimation of treatment effects is selection bias, which arises from the fact that treated individuals differ from the non-treated for reasons other than treatment status per se. Treatment effects can be estimated using social experiments, regression models, matching estimators, and instrumental variables.


Average treatment effect Constant-effects models Identifying assumptions Instrumental variables (IV) methods Law of large numbers Local average treatment effect Matching estimators Monotonicity Omitted variables bias: see selection bias Potential-outcomes framework Propensity-score matching Regression models Selection bias Switching regressions model Treatment effect Two-stage least squares Two-step estimators Wald estimator 

JEL Classifications

C14 C21 C31 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Joshua D. Angrist
    • 1
  1. 1.