A latent factor panel approach to spatiotemporal causal inference

Unmeasured confounding can severely bias causal effect estimates from spatiotemporal observational data, especially when the confounders do not vary smoothly in time and space. In this work, we develop a method for addressing unmeasured confounding in spatiotemporal contexts by building on models from the panel data literature and methods in multivariate causal inference. Our method is based on a factor confounding assumption, which posits that effects of unmeasured confounders on exposures and outcomes can be captured by a shared latent factor model. Factor confounding is sufficient to partially identify causal effects, even when there is interference between units. Additional assumptions that limit the degree of spatiotemporal interference, reasonable in most applications, are sufficient to point-identify the effects. Simulation studies demonstrate that the proposed approach can substantially reduce omitted variable bias relative to other spatial smoothing and panel data baselines. We illustrate our method in a case study of the effect of prenatal $\text{PM}_{2.5}$ exposure on birth weight in California.