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Sensitivity checks for the local average treatment effect

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  • Huber, Martin

Abstract

The nonparametric identification of the local average treatment effect (LATE) hinges on the satisfaction of three instrumental variable assumptions: (1) unconfounded assignment of the instrument, (2) no average direct effect of the instrument on the outcome within compliance types (exclusion restriction), and (3) weak monotonicity of the treatment in the instrument. While (1) often appears plausible in experiments when using randomization as instrument for actual participation, (2) and (3) may be controversial. For this reason, this paper proposes easily implementable sensitivity checks to assess the robustness of the LATE to deviations from either the exclusion restriction or monotonicity. An empirical illustration based on female labor supply data is also provided.

Suggested Citation

  • Huber, Martin, 2014. "Sensitivity checks for the local average treatment effect," Economics Letters, Elsevier, vol. 123(2), pages 220-223.
    • Handle: RePEc:eee:ecolet:v:123:y:2014:i:2:p:220-223
    DOI: 10.1016/j.econlet.2014.02.018
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nicolas Apfel & Helmut Farbmacher & Rebecca Groh & Martin Huber & Henrika Langen, 2022. "Detecting Grouped Local Average Treatment Effects and Selecting True Instruments," Papers 2207.04481, arXiv.org, revised Oct 2023.
    2. Kaspar Wüthrich, 2020. "A Comparison of Two Quantile Models With Endogeneity," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(2), pages 443-456, April.
    3. Martin Huber, 2015. "Testing the Validity of the Sibling Sex Ratio Instrument," LABOUR, CEIS, vol. 29(1), pages 1-14, March.
    4. Huber Martin & Wüthrich Kaspar, 2019. "Local Average and Quantile Treatment Effects Under Endogeneity: A Review," Journal of Econometric Methods, De Gruyter, vol. 8(1), pages 1-27, January.
    5. Matthew A. Masten & Alexandre Poirier, 2021. "Salvaging Falsified Instrumental Variable Models," Econometrica, Econometric Society, vol. 89(3), pages 1449-1469, May.
    6. Huber, Martin & Wüthrich, Kaspar, 2017. "Evaluating local average and quantile treatment effects under endogeneity based on instruments: a review," FSES Working Papers 479, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    7. Claudia Noack, 2021. "Sensitivity of LATE Estimates to Violations of the Monotonicity Assumption," Papers 2106.06421, arXiv.org.

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    More about this item

    Keywords

    Instrumental variable; Treatment effects; LATE; Sensitivity analysis;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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