IV Quantile Regression for Group-Level Treatments, with an Application to the Effects of Trade on the Distribution of Wages

41 Pages Posted: 21 Dec 2013

See all articles by Denis Chetverikov

Denis Chetverikov

University of California, Los Angeles (UCLA) - Department of Economics

Bradley Larsen

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); eBay Research Labs

Christopher Palmer

MIT Sloan; National Bureau of Economic Research (NBER)

Date Written: December 5, 2013

Abstract

We present a methodology for estimating the distributional effects of an endogenous treatment that varies at the group level when there are group-level unobservables, a quantile extension of Hausman and Taylor (1981). Standard quantile regression techniques are inconsistent in this setting, even if the treatment is exogenous. Using the Bahadur representation of quantile estimators, we derive weak conditions on the growth of the number of observations per group that are sufficient for consistency and asymptotic normality. Simulations confirm the superiority of this grouped instrumental variables quantile regression estimator to standard quantile regression. An empirical application finds that low-wage earners in the U.S. from 1990-2007 were significantly more affected by increased Chinese import competition than high-wage earners. We also illustrate the usefulness of the estimation approach with additional empirical examples from urban economics, labor, regulation, and empirical auctions.

Keywords: quantile regression, instrumental variables, panel data, wage inequality, import competition

JEL Classification: C21, C31, C33, C36, J30

Suggested Citation

Chetverikov, Denis and Larsen, Bradley and Palmer, Christopher, IV Quantile Regression for Group-Level Treatments, with an Application to the Effects of Trade on the Distribution of Wages (December 5, 2013). Available at SSRN: https://ssrn.com/abstract=2370140 or http://dx.doi.org/10.2139/ssrn.2370140

Denis Chetverikov

University of California, Los Angeles (UCLA) - Department of Economics ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

Bradley Larsen (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

HOME PAGE: http://www.stanford.edu/~bjlarsen/research.html

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Christopher Palmer

MIT Sloan ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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