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

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

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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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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  1. David Deming & Susan Dynarski, 2008. "The Lengthening of Childhood," NBER Working Papers 14124, National Bureau of Economic Research, Inc.
  2. Kelly Bedard & Elizabeth Dhuey, 2006. "The Persistence of Early Childhood Maturity: International Evidence of Long-Run Age Effects," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1437-1472.
  3. 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, vol. 31(3), pages 68-76.
  4. Rashmi Barua & Kevin Lang, 2009. "School Entry, Educational Attainment and Quarter of Birth: A Cautionary Tale of LATE," NBER Working Papers 15236, National Bureau of Economic Research, Inc.
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  6. Keane, Michael P., 2010. "Structural vs. atheoretic approaches to econometrics," Journal of Econometrics, Elsevier, vol. 156(1), pages 3-20, May.
  7. 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).
  8. 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).
  9. Klein, T.J., 2008. "Heterogeneous Treatment Effects : Instrumental Variables Without Monotonicity?," Discussion Paper 2008-45, Tilburg University, Center for Economic Research.
  10. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2009. "Understanding Instrumental Variables in Models with Essential Heterogeneity," Working Papers 200941, Geary Institute, University College Dublin.
  11. Patrick Puhani & Andrea Weber, 2007. "Does the early bird catch the worm?," Empirical Economics, Springer, vol. 32(2), pages 359-386, May.
  12. Datar, Ashlesha, 2006. "Does delaying kindergarten entrance give children a head start?," Economics of Education Review, Elsevier, vol. 25(1), pages 43-62, February.
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