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instrument-basedestimationwithbinarisedtreatments_econometricsjournal
Journal article

Instrument-based estimation with binarised treatments: issues and tests for the exclusion restriction

BP2-STS

  • 2021
Published in:
  • The Econometrics Journal. - Royal Economic Society / Oxford University Press. - 2021, vol. 24, p. 536-558
instrumental variable
LATE
binarised treatment
exclusion restriction
English When estimating local average and marginal treatment effects using instrumental variables (IVs), multivalued endogenous treatments are frequently converted to binary measures, supposedly to improve interpretability or policy relevance. Such binarisation introduces a violation of the IV exclusion if (a) the IV affects the multivalued treatment within support areas below and/or above the threshold and (b) such IV-induced changes in the multivalued treatment affect the outcome. We discuss assumptions that satisfy the IV exclusion restriction with a binarised treatment and permit identifying the average effect of (a) the binarised treatment and (b) unit-level increases in the original multivalued treatment among specific compliers. We derive testable implications of these assumptions and propose tests which we apply to the estimation of the returns to college graduation instrumented by college proximity.
Faculty
Faculté des sciences économiques et sociales et du management
Department
Département d'économie politique
Language
  • English
Classification
Economics
License
License undefined
Open access status
green
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/330276
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