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Monotone Instrumental Variables, with an Application to the Returns to Schooling

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  • Charles F. Manski
  • John V. Pepper

Abstract

Econometric analyses of treatment response commonly use instrumental variable (IV) assumptions to identify treatment effects. Yet the credibility of IV assumptions is often a matter of considerable disagreement. There is therefore good reason to consider weaker but more credible assumptions. To this end, we introduce monotone instrumental variable (MIV) assumptions and the important special case of monotone treatment selection (MTS). We study the identifying power of MIV assumptions alone and combined with the assumption of monotone treatment response (MTR). We present an empirical application using the MTS and MTR assumptions to place upper bounds on the returns to schooling.
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Suggested Citation

  • Charles F. Manski & John V. Pepper, 2000. "Monotone Instrumental Variables, with an Application to the Returns to Schooling," Econometrica, Econometric Society, vol. 68(4), pages 997-1012, July.
  • Handle: RePEc:ecm:emetrp:v:68:y:2000:i:4:p:997-1012
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    References listed on IDEAS

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    1. Manski, Charles F, 1990. "Nonparametric Bounds on Treatment Effects," American Economic Review, American Economic Association, vol. 80(2), pages 319-323, May.
    2. John V. Pepper, 2000. "The Intergenerational Transmission Of Welfare Receipt: A Nonparametric Bounds Analysis," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 472-488, August.
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    5. Charles F. Manski, 1989. "Anatomy of the Selection Problem," Journal of Human Resources, University of Wisconsin Press, vol. 24(3), pages 343-360.
    6. Charles F. Manski, 1997. "Monotone Treatment Response," Econometrica, Econometric Society, vol. 65(6), pages 1311-1334, November.
    7. Lang, Kevin & Ruud, Paul A, 1986. "Returns to Schooling, Implicit Discount Rates and Black-White Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 41-47, February.
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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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