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SUMMARY

This paper builds on the methods of local instrumental variables developed by Heckman and Vytlacil (1999, 2001, 2005) to estimate person-centered treatment (PeT) effects that are conditioned on the person's observed characteristics and averaged over the potential conditional distribution of unobserved characteristics that lead them to their observed treatment choices. PeT effects are more individualized than conditional treatment effects from a randomized setting with the same observed characteristics. PeT effects can be easily aggregated to construct any of the mean treatment effect parameters and, more importantly, are well suited to comprehend individual-level treatment effect heterogeneity. The paper presents the theory behind PeT effects, and applies it to study the variation in individual-level comparative effects of prostate cancer treatments on overall survival and costs. Copyright © 2013 John Wiley & Sons, Ltd.