Randomization Inference beyond the Sharp Null: Bounded Null Hypotheses and Quantiles of Individual Treatment Effects

Abstract: Randomization inference (RI) is typically interpreted as testing Fisher's "sharp" null hypothesis that all unit-level effects are exactly zero. This hypothesis is often criticized as restrictive and implausible, making its rejection scientifically uninteresting. We show, however, that many randomization tests are also valid for a "bounded" null hypothesis under which the unit-level effects are all non-positive (or all non-negative) but are otherwise heterogeneous. In addition to being more plausible a priori, bounded nulls are closely related to substantively important concepts such as monotonicity and Pareto efficiency. Reinterpreting RI in this way also dramatically expands the range of inferences possible in this framework. We show that exact confidence intervals for the maximum (or minimum) unit-level effect can be obtained by inverting tests for a sequence of bounded nulls. We also generalize RI to cover inference for quantiles of the individual effect distribution as well as for the proportion of individual effects larger (or smaller) than a given threshold. The proposed confidence intervals for all effect quantiles are simultaneously valid, in the sense that no correction for multiple analyses is required, and are thus a "free lunch" added to conventional RI. In sum, our reinterpretation and generalization provide a broader justification for randomization tests and a basis for exact nonparametric inference for effect quantiles. We illustrate our methods with simulations and applications, finding that Stephenson rank statistics can provide more informative results than the more common Wilcoxon rank or difference-in-means statistics. We also provide an R package RIQITE implementing the proposed approach.