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Combining Matching and Nonparametric IV Estimation: Theory and an Application to the Evaluation of Active Labour Market Policies

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  • Michael Lechner
  • Markus Froelich

Abstract

In this paper, we show how instrumental variable and matching estimators can be combined in order to identify a broader array of treatment effects. Instrumental variable estimators are known to estimate effects only for the compliers, which often represent only a small subset of the entire population. By combining IV with matching, we can estimate also the treatment effects for the always- and never-takers. In our application to the active labour market programmes in Switzerland, we find large positive employment effects for at least 8 years after treatment for the compliers. On the other hand, the effects for the always- and never-participants are small. In addition, when examining the potential outcomes separately, we find that the compliers have the worst employment outcomes without treatment. Hence, the assignment policy of the caseworkers was inefficient in that the always-participants were neither those with the highest treatment effect nor those with the largest need for assistance.

Suggested Citation

  • Michael Lechner & Markus Froelich, 2010. "Combining Matching and Nonparametric IV Estimation: Theory and an Application to the Evaluation of Active Labour Market Policies," University of St. Gallen Department of Economics working paper series 2010 2010-21, Department of Economics, University of St. Gallen.
    • Handle: RePEc:usg:dp2010:2010-21
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    References listed on IDEAS

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    Cited by:

    1. John Engberg & Dennis Epple & Jason Imbrogno & Holger Sieg & Ron Zimmer, 2014. "Evaluating Education Programs That Have Lotteried Admission and Selective Attrition," Journal of Labor Economics, University of Chicago Press, vol. 32(1), pages 27-63.
    2. Martin Huber & Giovanni Mellace, 2010. "Sharp IV bounds on average treatment effects under endogeneity and noncompliance," University of St. Gallen Department of Economics working paper series 2010 2010-31, Department of Economics, University of St. Gallen.

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    More about this item

    Keywords

    Local average treatment effect; conditional local IV; matching estimation; heterogeneous treatment effects; active labour market policy; state borders; geographic variation.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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