IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2112.08092.html
   My bibliography  Save this paper

Testing Instrument Validity with Covariates

Author

Listed:
  • Thomas Carr
  • Toru Kitagawa

Abstract

We develop a novel test of the instrumental variable identifying assumptions for heterogeneous treatment effect models with conditioning covariates. We assume semiparametric dependence between potential outcomes and conditioning covariates. This allows us to obtain testable equality and inequality restrictions among the subdensities of estimable partial residuals. We propose jointly testing these restrictions. To improve power, we introduce distillation, where a trimmed sample is used to test the inequality restrictions. In Monte Carlo exercises we find gains in finite sample power from testing restrictions jointly and distillation. We apply our test procedure to three instruments and reject the null for one.

Suggested Citation

  • Thomas Carr & Toru Kitagawa, 2021. "Testing Instrument Validity with Covariates," Papers 2112.08092, arXiv.org, revised Sep 2023.
    • Handle: RePEc:arx:papers:2112.08092
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2112.08092
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Manudeep Bhuller & Gordon B. Dahl & Katrine V. Løken & Magne Mogstad, 2020. "Incarceration, Recidivism, and Employment," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1269-1324.
    2. Cruces, Guillermo & Galiani, Sebastian, 2007. "Fertility and female labor supply in Latin America: New causal evidence," Labour Economics, Elsevier, vol. 14(3), pages 565-573, June.
    3. Clément de Chaisemartin & Xavier d'Haultfoeuille, 2012. "Late Again with Defiers," PSE Working Papers halshs-00699646, HAL.
    4. Brigham Frandsen & Lars Lefgren & Emily Leslie, 2023. "Judging Judge Fixed Effects," American Economic Review, American Economic Association, vol. 113(1), pages 253-277, January.
    5. Victor Chernozhukov & Sokbae Lee & Adam M. Rosen, 2013. "Intersection Bounds: Estimation and Inference," Econometrica, Econometric Society, vol. 81(2), pages 667-737, March.
    6. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
    7. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2010. "Small Family, Smart Family? Family Size and the IQ Scores of Young Men," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
    8. Clément de Chaisemartin, 2017. "Tolerating defiance? Local average treatment effects without monotonicity," Quantitative Economics, Econometric Society, vol. 8(2), pages 367-396, July.
    9. Gordon B. Dahl & Enrico Moretti, 2008. "The Demand for Sons," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 1085-1120.
    10. Zhenting Sun, 2020. "Instrument Validity for Heterogeneous Causal Effects," Papers 2009.01995, arXiv.org, revised Oct 2023.
    11. Philip Oreopoulos, 2006. "Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter," American Economic Review, American Economic Association, vol. 96(1), pages 152-175, March.
    12. Thomas Cornelissen & Christian Dustmann & Anna Raute & Uta Schönberg, 2018. "Who Benefits from Universal Child Care? Estimating Marginal Returns to Early Child Care Attendance," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2356-2409.
    13. Magne Mogstad & Alexander Torgovitsky & Christopher R. Walters, 2021. "The Causal Interpretation of Two-Stage Least Squares with Multiple Instrumental Variables," American Economic Review, American Economic Association, vol. 111(11), pages 3663-3698, November.
    14. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, vol. 88(3), pages 450-477, June.
    15. Philipp Eisenhauer & James J. Heckman & Edward Vytlacil, 2015. "The Generalized Roy Model and the Cost-Benefit Analysis of Social Programs," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 413-443.
    16. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, May.
    17. Rud, Juan Pablo, 2012. "Electricity provision and industrial development: Evidence from India," Journal of Development Economics, Elsevier, vol. 97(2), pages 352-367.
    18. Christian N. Brinch & Magne Mogstad & Matthew Wiswall, 2017. "Beyond LATE with a Discrete Instrument," Journal of Political Economy, University of Chicago Press, vol. 125(4), pages 985-1039.
    19. Pedro Carneiro & James J. Heckman & Edward J. Vytlacil, 2011. "Estimating Marginal Returns to Education," American Economic Review, American Economic Association, vol. 101(6), pages 2754-2781, October.
    20. Martin Huber & Giovanni Mellace, 2015. "Testing Instrument Validity for LATE Identification Based on Inequality Moment Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 398-411, May.
    21. Taryn Dinkelman, 2011. "The Effects of Rural Electrification on Employment: New Evidence from South Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3078-3108, December.
    22. Helmut Farbmacher & Raphael Guber & Sven Klaassen, 2022. "Instrument Validity Tests With Causal Forests," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(2), pages 605-614, April.
    23. James J. Heckman & John Eric Humphries & Gregory Veramendi, 2018. "Returns to Education: The Causal Effects of Education on Earnings, Health, and Smoking," Journal of Political Economy, University of Chicago Press, vol. 126(S1), pages 197-246.
    24. Melvin Stephens Jr. & Dou-Yan Yang, 2014. "Compulsory Education and the Benefits of Schooling," American Economic Review, American Economic Association, vol. 104(6), pages 1777-1792, June.
    25. Lance Lochner & Enrico Moretti, 2004. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports," American Economic Review, American Economic Association, vol. 94(1), pages 155-189, March.
    26. Machado, Cecilia & Shaikh, Azeem M. & Vytlacil, Edward J., 2019. "Instrumental variables and the sign of the average treatment effect," Journal of Econometrics, Elsevier, vol. 212(2), pages 522-555.
    27. Molly Lipscomb & A. Mushfiq Mobarak & Tania Barham, 2013. "Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(2), pages 200-231, April.
    28. Toru Kitagawa, 2015. "A Test for Instrument Validity," Econometrica, Econometric Society, vol. 83(5), pages 2043-2063, September.
    29. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
    30. Dalton Conley & Rebecca Glauber, 2006. "Parental Educational Investment and Children’s Academic Risk: Estimates of the Impact of Sibship Size and Birth Order from Exogenous Variation in Fertility," Journal of Human Resources, University of Wisconsin Press, vol. 41(4).
    31. Joshua Angrist & Victor Lavy & Analia Schlosser, 2010. "Multiple Experiments for the Causal Link between the Quantity and Quality of Children," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 773-824, October.
    32. Sascha Becker & Francesco Cinnirella & Ludger Woessmann, 2010. "The trade-off between fertility and education: evidence from before the demographic transition," Journal of Economic Growth, Springer, vol. 15(3), pages 177-204, September.
    33. Carneiro, Pedro & Lee, Sokbae, 2009. "Estimating distributions of potential outcomes using local instrumental variables with an application to changes in college enrollment and wage inequality," Journal of Econometrics, Elsevier, vol. 149(2), pages 191-208, April.
    34. Damon Clark & Heather Royer, 2013. "The Effect of Education on Adult Mortality and Health: Evidence from Britain," American Economic Review, American Economic Association, vol. 103(6), pages 2087-2120, October.
    35. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2020. "On the road: Access to transportation infrastructure and economic growth in China," Journal of Development Economics, Elsevier, vol. 145(C).
    36. Martin Huber, 2015. "Testing the Validity of the Sibling Sex Ratio Instrument," LABOUR, CEIS, vol. 29(1), pages 1-14, March.
    37. Magne Mogstad & Andres Santos & Alexander Torgovitsky, 2018. "Using Instrumental Variables for Inference About Policy Relevant Treatment Parameters," Econometrica, Econometric Society, vol. 86(5), pages 1589-1619, September.
    38. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    39. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2013. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," American Economic Review, American Economic Association, vol. 103(5), pages 1797-1829, August.
    40. David Blakeslee & Ram Fishman & Veena Srinivasan, 2020. "Way Down in the Hole: Adaptation to Long-Term Water Loss in Rural India," American Economic Review, American Economic Association, vol. 110(1), pages 200-224, January.
    41. Lukas Laffers & Giovanni Mellace, 2017. "A note on testing instrument validity for the identification of LATE," Empirical Economics, Springer, vol. 53(3), pages 1281-1286, November.
    42. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 189-221.
    43. Guido W. Imbens & Donald B. Rubin, 1997. "Estimating Outcome Distributions for Compliers in Instrumental Variables Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 555-574.
    44. Felfe, Christina & Lalive, Rafael, 2018. "Does early child care affect children's development?," Journal of Public Economics, Elsevier, vol. 159(C), pages 33-53.
    45. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
    46. Marshall, John, 2016. "Coarsening Bias: How Coarse Treatment Measurement Upwardly Biases Instrumental Variable Estimates," Political Analysis, Cambridge University Press, vol. 24(2), pages 157-171, April.
    47. Datta, Saugato, 2012. "The impact of improved highways on Indian firms," Journal of Development Economics, Elsevier, vol. 99(1), pages 46-57.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhenting Sun & Kaspar Wuthrich, 2022. "Pairwise Valid Instruments," Papers 2203.08050, arXiv.org, revised Jan 2024.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schmieder, Julia, 2021. "Fertility as a driver of maternal employment," Labour Economics, Elsevier, vol. 72(C).
    2. Huber, Martin & Wüthrich, Kaspar, 2017. "Evaluating local average and quantile treatment effects under endogeneity based on instruments: a review," FSES Working Papers 479, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    3. Julia Schmieder, 2020. "Fertility as a Driver of Maternal Employment," Discussion Papers of DIW Berlin 1882, DIW Berlin, German Institute for Economic Research.
    4. Guber, Raphael, 2018. "Instrument Validity Tests with Causal Trees: With an Application to the Same-sex Instrument," MEA discussion paper series 201805, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    5. Matthias Westphal & Daniel A Kamhöfer & Hendrik Schmitz, 2022. "Marginal College Wage Premiums Under Selection Into Employment," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2231-2272.
    6. Rui Wang, 2023. "Point Identification of LATE with Two Imperfect Instruments," Papers 2303.13795, arXiv.org.
    7. Kitagawa, Toru, 2021. "The identification region of the potential outcome distributions under instrument independence," Journal of Econometrics, Elsevier, vol. 225(2), pages 231-253.
    8. Laura Schmitz, 2022. "Heterogeneous Effects of After-School Care on Child Development," Discussion Papers of DIW Berlin 2006, DIW Berlin, German Institute for Economic Research.
    9. Jan Priebe, 2020. "Quasi-experimental evidence for the causal link between fertility and subjective well-being," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(3), pages 839-882, July.
    10. Black, Dan A. & Joo, Joonhwi & LaLonde, Robert & Smith, Jeffrey A. & Taylor, Evan J., 2022. "Simple Tests for Selection: Learning More from Instrumental Variables," Labour Economics, Elsevier, vol. 79(C).
    11. Huber Martin & Wüthrich Kaspar, 2019. "Local Average and Quantile Treatment Effects Under Endogeneity: A Review," Journal of Econometric Methods, De Gruyter, vol. 8(1), pages 1-27, January.
    12. Robert A. Moffitt & Matthew V. Zahn, 2019. "The Marginal Labor Supply Disincentives of Welfare: Evidence from Administrative Barriers to Participation," NBER Working Papers 26028, National Bureau of Economic Research, Inc.
    13. Pereda-Fernández, Santiago, 2023. "Identification and estimation of triangular models with a binary treatment," Journal of Econometrics, Elsevier, vol. 234(2), pages 585-623.
    14. Cornelissen, Thomas & Dustmann, Christian & Raute, Anna & Schönberg, Uta, 2016. "From LATE to MTE: Alternative methods for the evaluation of policy interventions," Labour Economics, Elsevier, vol. 41(C), pages 47-60.
    15. Bartalotti, Otávio & Kédagni, Désiré & Possebom, Vitor, 2023. "Identifying marginal treatment effects in the presence of sample selection," Journal of Econometrics, Elsevier, vol. 234(2), pages 565-584.
    16. Ismael Mourifié & Yuanyuan Wan, 2017. "Testing Local Average Treatment Effect Assumptions," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 305-313, May.
    17. Bonsang, Eric & Pronkina, Elizaveta, 2023. "Family size and vaccination among older individuals: The case of COVID-19 vaccine," Economics & Human Biology, Elsevier, vol. 50(C).
    18. Claudia Noack, 2021. "Sensitivity of LATE Estimates to Violations of the Monotonicity Assumption," Papers 2106.06421, arXiv.org.
    19. Domenico Depalo, 2020. "Explaining the causal effect of adherence to medication on cholesterol through the marginal patient," Health Economics, John Wiley & Sons, Ltd., vol. 29(S1), pages 110-126, October.
    20. Gathmann, Christina & Vonnahme, Christina & Busse, Anna & Kim, Jongoh, 2021. "Marginal returns to citizenship and educational performance," Ruhr Economic Papers 920, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2112.08092. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.