Instrumental Variable Estimation of Treatment Effects for Duration Outcomes

42 Pages Posted: 19 Jul 2007  

Govert E. Bijwaard

Netherlands Interdisciplinary Demographic Institute (NIDI); Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); IZA Institute of Labor Economics

Date Written: June 2007

Abstract

In this article we propose and implement an instrumental variable estimation procedure to obtain treatment effects on duration outcomes. The method can handle the typical complications that arise with duration data of time-varying treatment and censoring. The treatment effect we define is in terms of shifting the quantiles of the outcome distribution based on the Generalized Accelerated Failure Time (GAFT) model. The GAFT model encompasses two competing approaches to duration data; the (Mixed) Proportional Hazard (MPH) model and the Accelerated Failure Time (AFT) model. We discuss the large sample properties of the proposed Instrumental Variable Linear Rank (IVLR), and show how we can, with one additional step, improve upon its efficiency. We discuss the empirical implementation of the estimator and apply it to the Illinois re-employment bonus experiment.

Keywords: treatment effect, duration model, censoring, instrumental variable

JEL Classification: C21, C41, J64

Suggested Citation

Bijwaard, Govert E., Instrumental Variable Estimation of Treatment Effects for Duration Outcomes (June 2007). IZA Discussion Paper No. 2896. Available at SSRN: https://ssrn.com/abstract=1000146

Govert Bijwaard (Contact Author)

Netherlands Interdisciplinary Demographic Institute (NIDI) ( email )

P.O. Box 11650
NL-2502 AR The Hague
Netherlands
+31 70 3565224 (Phone)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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