Question

Please define what a Local Average Treatment Effect (LATE) is and how it differs from an ITT effect.

Answer 1

The Local Average Treatment Effect (LATE), also known as the ‘Complier Average Casual Effect (CACE), is the average treatment effect for the compliers (compliers are the subjects that do what they are supposed to do: they are treated when they are assigned to the treatment group and they are not treated when they are assigned to the control group). The LATE can be estimated by a ratio of the estimated intent-to-treat effect (ITT) and the estimates proportion of compliers, or alternatively through an instrumental variable estimator.

Intention-to-treat effect (ITT) is the potential solution to the two major complications i.e. , noncompliance and missing outcomes. It includes every subject who is randomized according to randomized treatment assignment. It ignores noncompliance, protocol deviations, withdrawal and everything that happens after randomization. In ITT effect, estimate of treatment effect is generally conservative.

The difference between ITT and LATE is that ITT refers to the effect of assignment on outcome whereas LATE refers effect of treatment on outcome for compliers. Also, the LATE estimate is calculated as the intention –to-treat estimate (ITT) divided by the estimated share of compliers in the population. With noncompliance, the share of compliers in the population is smaller than one. As a result, the LATE estimate will always be larger than ITT estimate.