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Generalized instrumental inequalities: testing the instrumental variable independence assumption

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  • Kedagni, Desire
  • Mourifié, Ismael

Abstract

This paper proposes a new set of testable implications of the instrumen- tal variable (IV) independence assumption: generalized instrumental inequalities. In our leading case with a binary outcome, we show that the generalized instrumen- tal inequalities are necessary and sufficient to detect all observable violations of the IV independence assumption. To test the generalized instrumental inequalities, we propose an approach combining a sample splitting procedure and intersection bounds inferential methods. This idea allows one to easily implement the test using the Stata package of Chernozhukov, Kim, Lee, and Rosen (2015).We apply our pro- posed strategy to assess the validity of the IV independence assumption for various instruments used in the returns to college literature.

Suggested Citation

  • Kedagni, Desire & Mourifié, Ismael, 2020. "Generalized instrumental inequalities: testing the instrumental variable independence assumption," ISU General Staff Papers 202002290800001697, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:202002290800001697
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    Cited by:

    1. Santiago Acerenza & Otávio Bartalotti & Désiré Kédagni, 2023. "Testing identifying assumptions in bivariate probit models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 407-422, April.
    2. Ban, Kyunghoon & Kedagni, Desire, 2020. "Nonparametric Bounds on Treatment Effects with Imperfect Instruments," ISU General Staff Papers 202010120700001113, Iowa State University, Department of Economics.
    3. Shengjie Hong & Yu-Chin Hsu & Yuanyuan Wan, 2023. "Subvector inference for Varying Coefficient Models with Partial Identification," Working Papers tecipa-756, University of Toronto, Department of Economics.
    4. Lixiong Li & D'esir'e K'edagni & Ismael Mourifi'e, 2020. "Discordant Relaxations of Misspecified Models," Papers 2012.11679, arXiv.org, revised Dec 2022.
    5. Zhewen Pan & Zhengxin Wang & Junsen Zhang & Yahong Zhou, 2024. "Marginal treatment effects in the absence of instrumental variables," Papers 2401.17595, arXiv.org.
    6. Chaoran Chen & Zhigang Feng & Jiaying Gu, 2022. "Health, Health Insurance, and Inequality," Working Papers tecipa-730, University of Toronto, Department of Economics.
    7. Zhenting Sun & Kaspar Wuthrich, 2022. "Pairwise Valid Instruments," Papers 2203.08050, arXiv.org, revised Jan 2024.

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