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Testing For Treatment Dependence Of Effects Of A Continuous Treatment

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  • Lu, Xun
  • White, Habert

Abstract

This paper provides nonparametric tests for hypotheses about the effects of a continuous treatment variable in a nonseparable structural equation. Specifically, we consider local average responses and average partial effects and test whether these effects are identical across different levels of treatment, including testing whether they are zero for all treatment levels as a special case. Our tests are based on consistent procedures of Bierens (1982, Journal of Econometrics 20, 105–134; 1990, Econometrica 58, 1443–1458) and Stinchcombe and White (1998, Econometric Theory 14, 295–324). The tests are easy to implement and achieve n-1/2 local power. Monte Carlo simulations show that the tests perform well in finite samples. We apply our tests to study the interest rate elasticities of loan demand in microfinance. We also extend our testing procedures to covariate-conditioned average effects and marginal effects.

Suggested Citation

  • Lu, Xun & White, Habert, 2015. "Testing For Treatment Dependence Of Effects Of A Continuous Treatment," Econometric Theory, Cambridge University Press, vol. 31(5), pages 1016-1053, October.
    • Handle: RePEc:cup:etheor:v:31:y:2015:i:05:p:1016-1053_00
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    References listed on IDEAS

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    1. Fan, Yanqin & Li, Qi, 2000. "Consistent Model Specification Tests," Econometric Theory, Cambridge University Press, vol. 16(6), pages 1016-1041, December.
    2. Dewatripont,Mathias & Hansen,Lars Peter & Turnovsky,Stephen J. (ed.), 2003. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521818742, January.
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    4. Dean S. Karlan & Jonathan Zinman, 2008. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance," American Economic Review, American Economic Association, vol. 98(3), pages 1040-1068, June.
    5. Dewatripont,Mathias & Hansen,Lars Peter & Turnovsky,Stephen J. (ed.), 2003. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521818735, January.
    6. Dewatripont,Mathias & Hansen,Lars Peter & Turnovsky,Stephen J. (ed.), 2003. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521524124, January.
    7. Dewatripont,Mathias & Hansen,Lars Peter & Turnovsky,Stephen J. (ed.), 2003. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521818728, January.
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    10. White, Halbert, 2006. "Approximate Nonlinear Forecasting Methods," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 1, chapter 9, pages 459-512, Elsevier.
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