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Is Monotonicity in an IV and RD Design Testable? No, But You Can Still Check on it

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 Economics Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 7.

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Length: 24
Date of creation: 01 Apr 2013
Date of revision:
Handle: RePEc:uts:ecowps:7
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  1. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
  2. Dionissi Aliprantis, 2012. "Redshirting, Compulsory Schooling Laws, and Educational Attainment," Journal of Educational and Behavioral Statistics, , vol. 37(2), pages 316-338, April.
  3. Kelly Bedard & Elizabeth Dhuey, 2006. "The Persistence of Early Childhood Maturity: International Evidence of Long-Run Age Effects," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1437-1472, November.
  4. Patrick Puhani & Andrea Weber, 2007. "Does the early bird catch the worm?," Empirical Economics, Springer, vol. 32(2), pages 359-386, May.
  5. Datar, Ashlesha, 2006. "Does delaying kindergarten entrance give children a head start?," Economics of Education Review, Elsevier, vol. 25(1), pages 43-62, February.
  6. Mühlenweg, Andrea M. & Blomeyer, Dorothea & Laucht, Manfred, 2011. "Effects of age at school entry (ASE) on the development of non-cognitive skills: Evidence from psychometric data," ZEW Discussion Papers 11-017, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Keane, Michael P., 2010. "Structural vs. atheoretic approaches to econometrics," Journal of Econometrics, Elsevier, vol. 156(1), pages 3-20, May.
  8. Kevin Lang & Rashmi Barua, 2010. "School Entry, Educational Attainment and Quarter of Birth: A Cautionary Tale of LATE," Boston University - Department of Economics - Working Papers Series WP2010-019, Boston University - Department of Economics.
  9. 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).
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