Decomposition of Spillover Effects Under Misspecification: Pseudo-true Estimands and a Local-Global Extension

Abstract

To measure spillovers, researchers often summarize who else was treated with a simple measure, such as the share of treated neighbors. We study what the researcher estimates when that summary is misspecified. We show that the researcher estimates the best approximation to the true policy effect among all functionals of the chosen summary, and that the usual direct and spillover estimates are exactly the components of this approximation. Under a monotonicity restriction, the estimates also preserve the signs of the true effects. We then specialize this framework to a setting common in applications such as cash transfers: treatment spills over both globally, through market equilibrium, and locally, through network externalities, while the researcher models only one channel. The network estimator still recovers the network spillover, and the equilibrium estimator the equilibrium spillover, even when the other channel is ignored. We illustrate with a simulation calibrated to a large cash-transfer experiment.