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Is Monotonicity in an IV and RD design testable? No, but you can still check it

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  • Edwards, Ben
  • Fiorini, Mario
  • Stevens, Katrien
  • Taylor, Matthew

Abstract

Whenever treatment effects are heterogeneous and there is sorting into treatment based on the gain, monotonicity is a condition that both Instrumental Variable and fuzzy Regression Discontinuity designs have to satisfy for their estimand to be interpretable as a LATE. Angrist and Imbens (1995) argue that the monotonicity assumption is testable whenever the treatment is multivalued. We show that their test is informative if counterfactuals are observed. Yet applying the test without observing counterfactuals, as it is generally done, is not. Nevertheless, we argue that monotonicity can and should be investigated using a mix of economic intuition and data patterns, just like other untestable assumptions in an IV or RD design. We provide examples in a variety of settings as a guide to practice.

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File URL: http://hdl.handle.net/2123/9020
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Bibliographic Info

Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2013-06.

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Date of creation: Apr 2013
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Handle: RePEc:syd:wpaper:2123/9020

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Postal: Sydney, NSW 2006
Phone: 61 +2 9351 5055
Fax: 61 +2 9351 4341
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Web page: http://sydney.edu.au/arts/economics
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  2. Keane, Michael P., 2010. "Structural vs. atheoretic approaches to econometrics," Journal of Econometrics, Elsevier, Elsevier, vol. 156(1), pages 3-20, May.
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  7. Klein, Tobias J., 2007. "Heterogeneous Treatment Effects: Instrumental Variables without Monotonicity?," IZA Discussion Papers 2738, Institute for the Study of Labor (IZA).
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  9. Todd E. Elder & Darren H. Lubotsky, 2009. "Kindergarten Entrance Age and Children’s Achievement: Impacts of State Policies, Family Background, and Peers," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
  10. Mühlenweg, Andrea & Blomeyer, Dorothea & Stichnoth, Holger & Laucht, Manfred, 2012. "Effects of age at school entry (ASE) on the development of non-cognitive skills: Evidence from psychometric data," Economics of Education Review, Elsevier, Elsevier, vol. 31(3), pages 68-76.
  11. Datar, Ashlesha, 2006. "Does delaying kindergarten entrance give children a head start?," Economics of Education Review, Elsevier, Elsevier, vol. 25(1), pages 43-62, February.
  12. Patrick J. McEwan & Joseph S. Shapiro, 2008. "The Benefits of Delayed Primary School Enrollment: Discontinuity Estimates Using Exact Birth Dates," Journal of Human Resources, University of Wisconsin Press, vol. 43(1).
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