Estimating Marginal Treatment Effects under Unobserved Group Heterogeneity

48 Pages Posted: 7 Feb 2020 Last revised: 23 May 2022

See all articles by Tadao Hoshino

Tadao Hoshino

Waseda University

Takahide Yanagi

Kyoto University - Graduate School of Economics

Date Written: May 2022

Abstract

This paper studies treatment effect models in which individuals are classified into unobserved groups based on heterogeneous treatment rules. Using a finite mixture approach, we propose a marginal treatment effect (MTE) framework in which the treatment choice and outcome equations can be heterogeneous across groups. Under the availability of instrumental variables specific to each group, we show that the MTE for each group can be separately identified. Based on our identification result, we propose a two-step semiparametric procedure for estimating the group-wise MTE. We illustrate the usefulness of the proposed method with an application to economic returns to college education.

Keywords: endogeneity, finite mixture, instrumental variables, marginal treatment effects, unobserved heterogeneity

JEL Classification: C14, C31, C35

Suggested Citation

Hoshino, Tadao and Yanagi, Takahide, Estimating Marginal Treatment Effects under Unobserved Group Heterogeneity (May 2022). Available at SSRN: https://ssrn.com/abstract=3525850 or http://dx.doi.org/10.2139/ssrn.3525850

Tadao Hoshino

Waseda University ( email )

1-104 Totsuka
Shinjuku, Tokyo 169-8050
Japan

Takahide Yanagi (Contact Author)

Kyoto University - Graduate School of Economics ( email )

Yoshida Honmachi
Sakyo
Kyoto, Kyoto 6068501
Japan

HOME PAGE: http://https://sites.google.com/view/takahide-yanagi/

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