Hybridizing Machine Learning Methods and Finite Mixture Models for Estimating Heterogeneous Treatment Effects in Latent Classes

Abstract

There has been increasing interest in exploring heterogeneous treatment effects using machine learning (ML) methods such as causal forests, Bayesian additive regression trees, and targeted maximum likelihood estimation. However, there is little work on applying these methods to estimate treatment effects in latent classes defined by well-established finite mixture/latent class models. This article proposes a hybrid method, a combination of finite mixture modeling and ML methods from causal inference to discover effect heterogeneity in latent classes. Our simulation study reveals that hybrid ML methods produced more precise and accurate estimates of treatment effects in latent classes. We also use hybrid ML methods to estimate the differential effects of private lessons across latent classes from Trends in International Mathematics and Science Study data.