The Spectral Structure of Latent Treatment Effects

Abstract

Identifying heterogeneous treatment effects under unobserved confounding is central in observational causal inference. In proxy models with a discrete latent confounder, prior Synthetic Potential Outcomes (SPO) [Mazaheri-Squires-Uhler '25] recover the mixture of treatment effects through recursively constructed scalar moments. We show that this sequence is one projection of a more fundamental object. Under the same population factorization assumptions, there is an exact compressed observable operator: after projecting onto the shared proxy signal subspace, the difference of two treatment-arm quotient operators is similar to the diagonal matrix of latent treatment effects. Its eigenvalues are the latent effects; its lifted left eigenvectors, after anchor normalization, recover the target-proxy feature matrix and then the latent mixture proportions. Every scalar SPO moment is a bilinear functional of a power of this operator. The resulting estimator handles overcomplete proxy systems, replaces high-order scalar inversion with finite-dimensional spectral analysis, and admits high-probability first-order perturbation bounds for treatment effects, feature rows, and simplex-projected mixture weights.