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Semiparametric Estimation of Instrumental Variable Models for Causal Effects

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  • Alberto Abadie

Abstract

This article introduces a new class of instrumental variable (IV) estimators of causal treatment effects for linear and nonlinear models with covariates. The rationale for focusing on nonlinear models is to improve the approximation to the causal response function of interest. For example, if the dependent variable is binary or limited, or if the effect of the treatment varies with covariates, a nonlinear model is likely to be appropriate. However, identification is not attained through functional form restrictions. This paper shows how to estimate a well-defined approximation to a nonlinear causal response function of unknown functional form using simple parametric models. As an important special case, I introduce a linear model that provides the best linear approximation to an underlying causal relation. It is shown that Two Stage Least Squares (2SLS) does not always have this property and some possible interpretations of 2SLS coefficients are brie y studied. The ideas and estimators in this paper are illustrated using instrumental variables to estimate the effects of 401(k) retirement programs on savings.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0260.

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Date of creation: Sep 2000
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Publication status: published as Abadie, Alberto. "Bootstrap Tests For Distributional Treatment Effects In Instrumental Variable Models," Journal of the American Statistical Association, 2002, v97(457,Mar), 284-292.
Handle: RePEc:nbr:nberte:0260

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  1. Joshua D. Angrist & Guido W. Imbens, 1995. "Average Causal Response with Variable Treatment Intensity," NBER Technical Working Papers 0127, National Bureau of Economic Research, Inc.
  2. James M. Poterba & Steven F. Venti, 1998. "Personal Retirement Saving Programs and Asset Accumulation: Reconciling the Evidence," NBER Chapters, in: Frontiers in the Economics of Aging, pages 23-124 National Bureau of Economic Research, Inc.
  3. Alberto Abadie, 2000. "Bootstrap Tests for the Effect of a Treatment on the Distribution of an Outcome Variable," NBER Technical Working Papers 0261, National Bureau of Economic Research, Inc.
  4. repec:cup:etheor:v:10:y:1994:i:1:p:1-28 is not listed on IDEAS
  5. Hausman, J.A. & Newey, W.K., 1992. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Working papers 93-2, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. James M. Poterba & Steven F. Venti & David A. Wise, 1992. "401(k) Plans and Tax-Deferred Saving," NBER Working Papers 4181, National Bureau of Economic Research, Inc.
  8. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  9. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  10. Eric M. Engen & William G. Gale & John Karl Scholz, 1994. "Do Saving Incentives Work?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 85-180.
  11. Alberto Abadie & Joshua D. Angrist & Guido W. Imbens, 1998. "Instrumental Variables Estimation of Quantile Treatment Effects," NBER Technical Working Papers 0229, National Bureau of Economic Research, Inc.
  12. Newey, Whitney K, 1990. "Semiparametric Efficiency Bounds," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(2), pages 99-135, April-Jun.
  13. Newey, Whitney K., 1994. "Series Estimation of Regression Functionals," Econometric Theory, Cambridge University Press, vol. 10(01), pages 1-28, March.
  14. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  15. Imbens, Guido W & Rubin, Donald B, 1997. "Estimating Outcome Distributions for Compliers in Instrumental Variables Models," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 555-74, October.
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  17. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-18, May.
  18. Poterba, James M. & Venti, Steven F. & Wise, David A., 1995. "Do 401(k) contributions crowd out other personal saving?," Journal of Public Economics, Elsevier, vol. 58(1), pages 1-32, September.
  19. repec:att:wimass:9604 is not listed on IDEAS
  20. 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.
  21. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
  22. Charles F. Manski, 1997. "Monotone Treatment Response," Econometrica, Econometric Society, vol. 65(6), pages 1311-1334, November.
  23. Andrews, Donald W K, 1991. "Asymptotic Normality of Series Estimators for Nonparametric and Semiparametric Regression Models," Econometrica, Econometric Society, vol. 59(2), pages 307-45, March.
  24. Newey, Whitney K. & Powell, James L., 1993. "Efficiency bounds for some semiparametric selection models," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 169-184, July.
  25. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
  26. Newey, Whitney K., 1997. "Convergence rates and asymptotic normality for series estimators," Journal of Econometrics, Elsevier, vol. 79(1), pages 147-168, July.
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Cited by:
  1. Chen, Xinxin & Shi, Yaojiang & Rozelle, Scott, 2007. "Does Taking One Step Back Get You Two Steps Forward? Grade Retention and School Performance in Rural China," MPRA Paper 10917, University Library of Munich, Germany.
  2. Daniel Parent, 2002. "The Causal Effect of High School Employment on Educational Attainment in Canada," CIRANO Working Papers 2002s-28, CIRANO.
  3. Eyal, Yonatan & Beenstock, Michael, 2008. "Sign reversal in LIVE treatment effect estimates: The effect of vocational training on unemployment duration," Labour Economics, Elsevier, vol. 15(5), pages 1102-1125, October.
  4. Jacob N. Arendt, 2002. "Endogeneity and Heterogeneity in LDV Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D6-1, International Conferences on Panel Data.
  5. Christopher Taber & Hidehiko Ichimura, 2001. "Propensity-Score Matching with Instrumental Variables," American Economic Review, American Economic Association, vol. 91(2), pages 119-124, May.

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