Estimation of Policy-Relevant Causal Effects in the Presence of Interference with an Application to the Philadelphia Beverage Tax

Abstract: To comprehensively evaluate a public policy intervention, researchers must consider the effects of the policy not just on the implementing region, but also nearby, indirectly-affected regions. For example, an excise tax on sweetened beverages in Philadelphia was shown to not only be associated with a decrease in volume sales of taxed beverages in Philadelphia, but also an increase in sales in bordering counties not subject to the tax. The latter association may be explained by cross-border shopping behaviors of Philadelphia residents and indicate a causal effect of the tax on nearby regions, which may offset the total effect of the intervention. To estimate causal effects in this setting, we extend difference-in-differences methodology to account for such interference between regions and adjust for potential confounding present in quasi-experimental evaluations. Our doubly robust estimators for the average treatment effect on the treated and neighboring control relax standard assumptions on interference and model specification. We apply these methods to evaluate the change in volume sales of taxed beverages in 231 Philadelphia and bordering county stores due to the Philadelphia beverage tax. We also use our methods to explore the heterogeneity of effects across geographic features.