Chapter 3. The Econometrics of Randomized Experiments

In this chapter, we present econometric and statistical methods for analyzing randomized experiments. For basic experiments, we stress randomization-based inference as opposed to sampling-based inference. In randomization-based inference, uncertainty in estimates arises naturally from the random assignment of the treatments, rather than from hypothesized sampling from a large population. We show how this perspective relates to regression analyses for randomized experiments. We discuss the analyses of stratified, paired, and clustered randomized experiments, and we stress the general efficiency gains from stratification. We also discuss complications in randomized experiments such as noncompliance. In the presence of noncompliance, we contrast intention-to-treat analyses with instrumental variables analyses allowing for general treatment effect heterogeneity. We consider, in detail, estimation and inference for heterogenous treatment effects in settings with (possibly many) covariates. These methods allow researchers to explore heterogeneity by identifying subpopulations with different treatment effects while maintaining the ability to construct valid confidence intervals. We also discuss optimal assignment to treatment based on covariates in such settings. Finally, we discuss estimation and inference in experiments in settings with interactions between units, both in general network settings and in settings where the population is partitioned into groups with all interactions contained within these groups.