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Testing Instrument Validity for LATE Identification Based on Inequality Moment Constraints

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  • Martin Huber

    () (University of Fribourg)

  • Giovanni Mellace

    () (University of Southern Denmark)

Abstract

We derive testable implications of instrument validity in just identified treatment effect models with endogeneity and consider several tests. The identifying assumptions of the local average treatment effect allow us to both point identify and bound the mean potential outcomes of the always takers under treatment and the never takers under nontreatment. The point-identified means must lie within their respective bounds, which provides us with four testable inequality moment constraints. Finally, we adapt our testing framework to the identification of distributional features. A brief simulation study and an application to labor market data are also provided. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Martin Huber & Giovanni Mellace, 2015. "Testing Instrument Validity for LATE Identification Based on Inequality Moment Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 398-411, May.
  • Handle: RePEc:tpr:restat:v:97:y:2015:i:2:p:398-411
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    More about this item

    Keywords

    testable implications; endogeneity; mean potential outcomes; inequality moment; distributional features; labor market data;

    JEL classification:

    • J00 - Labor and Demographic Economics - - General - - - General

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