Seminar 242, Econometrics: "Algorithm is Experiment: Machine Learning, Market Design, and Policy Eligibility Rules"

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Submitted by Brandon Eltiste on August 05, 2021
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Location:
648 Evans Hall
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Time:
Thursday, September 9, 2021 - 16:10
About this Event

Yusuke Narita, Yale University

Abstract: Algorithms produce a growing portion of decisions and
recommendations both in policy and business. Such algorithmic
decisions are natural experiments (conditionally quasi-randomly
assigned instruments) since the algorithms make decisions based only
on observable input variables. We use this observation to develop a
treatment-effect estimator for a class of stochastic and deterministic
decision-making algorithms. Our estimator is shown to be consistent
and asymptotically normal for well-defined causal effects. A key
special case of our estimator is a multidimensional regression
discontinuity design. We apply our estimator to evaluate the effect of
the Coronavirus Aid, Relief, and Economic Security (CARES) Act, where
more than $175 billion worth of relief funding is allocated to
hospitals via an algorithmic rule. Our estimates suggest that the
relief funding has little effect on COVID-19-related hospital activity
levels. Naive OLS and IV estimates exhibit substantial selection bias.