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Testing Local Average Treatment Effect Assumptions

Author

Listed:
  • Ismael Mourifie
  • Yuanyuan Wan

Abstract

In this paper, we discuss the key conditions for the identification and estimation of the local average treatment effect (LATE, Imbens and Angrist, 1994): the valid instrument assumption (LI) and the monotonicity assumption (LM). We show that the joint assumptions of LI and LM have a testable implication that can be summarized by a sign restriction defined by a set of intersection bounds. We propose an easy-to-implement testing procedure that can be analyzed in the framework of Chernozhukov, Lee, and Rosen (2013) and implemented using the Stata package of Chernozhukov, Kim, Lee, and Rosen (2013). We apply the proposed tests to the "draft eligibility" instrument in Angrist (1991), the "college proximity" instrument in Card (1993) and the "same sex" instrument in Angrist and Evans (1998).

Suggested Citation

  • Ismael Mourifie & Yuanyuan Wan, 2014. "Testing Local Average Treatment Effect Assumptions," Working Papers tecipa-514, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-514
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    References listed on IDEAS

    as
    1. Kasy, Maximilian, "undated". "Instrumental variables with unrestricted heterogeneity and continuous treatment - DON'T CITE! SEE ERRATUM BELOW," Working Paper 33257, Harvard University OpenScholar.
    2. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
    3. repec:fth:prinin:317 is not listed on IDEAS
    4. de Chaisemartin, Clement, 2013. "Defying the LATE? Identification of local treatment effects when the instrument violates monotonicity," The Warwick Economics Research Paper Series (TWERPS) 1020, University of Warwick, Department of Economics.
    5. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:eee:ecolet:v:159:y:2017:i:c:p:23-27 is not listed on IDEAS
    2. Bolzern, Benjamin & Huber, Martin, 2017. "Testing the validity of the compulsory schooling law instrument," Economics Letters, Elsevier, vol. 159(C), pages 23-27.
    3. Dahl, Christian M. & Huber, Martin & Mellace, Giovanni, 2017. "It's never too LATE: A new look at local average treatment effects with or without defiers," Discussion Papers of Business and Economics 2/2017, University of Southern Denmark, Department of Business and Economics.

    More about this item

    Keywords

    LATE; Instrumental Variables; hypothesis testing; intersection bounds; conditionally more compliers;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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