Policy effect evaluation under counterfactual neighborhood interventions in the presence of spillover

Abstract

Policy interventions can spill over to units of a population that are not directly exposed to the policy but are geographically close to the units receiving the intervention. In recent work, investigations of spillover effects on neighboring regions have focused on estimating the average treatment effect of a particular policy in an observed setting. Our research question broadens this scope by asking what policy consequences would the treated units have experienced under hypothetical exposure settings. When we only observe treated unit(s) surrounded by controls -- as is common when a policy intervention is implemented in a single city or state -- this effect inquires about the policy effects under a counterfactual neighborhood policy status that we do not, in actuality, observe. In this work, we extend difference-in-differences (DiD) approaches to spillover settings and develop identification conditions required to evaluate policy effects in counterfactual treatment scenarios. These causal quantities are policy-relevant for designing effective policies for populations subject to various neighborhood statuses. We develop doubly robust estimators and use extensive numerical experiments to examine their performance under heterogeneous spillover effects. We apply our proposed method to investigate the effect of the Philadelphia beverage tax on unit sales.