Testing for Nonparametric Identification of Causal Effects in the Presence of a Quasi-Instrument

23 Pages Posted: 7 Jul 2012

See all articles by Xavier de Luna

Xavier de Luna

University of Umea - Department of Economics

Per Johansson

IFAU - Institute for Labour Market Policy Evaluation; Uppsala University - Department of Economics; IZA Institute of Labor Economics

Abstract

The identification of average causal effects of a treatment in observational studies is typically based either on the unconfoundedness assumption or on the availability of an instrument. When available, instruments may also be used to test for the unconfoundedness assumption (exogeneity of the treatment). In this paper, we define variables which we call quasi-instruments because they allow us to test for the unconfoundedness assumption although they do not necessarily yield nonparametric identification of the average causal effect. A quasi-instrument is defined as an instrument except for that its relation to the treatment is allowed to be confounded by unobservables, thereby resulting in a wider range of potential applications. We propose a test for the unconfoundedness assumption based on a quasi-instrument, and give conditions under which the test has power. We perform a simulation study and apply the results to a case study where the interest lies in evaluating the effect of job practice on employment.

Keywords: testing, endogeneity, monotonicity, potential outcomes

JEL Classification: C26, C52

Suggested Citation

de Luna, Xavier and Johansson, Per, Testing for Nonparametric Identification of Causal Effects in the Presence of a Quasi-Instrument. IZA Discussion Paper No. 6692, Available at SSRN: https://ssrn.com/abstract=2101979

Xavier De Luna (Contact Author)

University of Umea - Department of Economics ( email )

Umeå University
Umea, SE - 90187
Sweden

Per Johansson

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden
+ 46 18 471 70 86 (Phone)
+ 46 18 471 70 71 (Fax)

Uppsala University - Department of Economics ( email )

Uppsala, 751 20
Sweden

IZA Institute of Labor Economics

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

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