It's Never Too LATE: A New Look at Local Average Treatment Effects with or Without Defiers

Discussion Papers on Business and Economics, University of Southern Denmark, 2/2017

69 Pages Posted: 14 Feb 2017

See all articles by Christian M. Dahl

Christian M. Dahl

Department of Business and Economics

Martin Huber

University of Fribourg

Giovanni Mellace

University of Southern Denmark - Department of Business and Economics

Date Written: February 14, 2017

Abstract

In heterogeneous treatment effect models with endogeneity, identification of the LATE typically relies on the availability of an exogenous instrument monotonically related to treatment participation. We demonstrate that a strictly weaker local monotonicity condition identifies the LATEs on compliers and on defiers. We propose simple estimators that are potentially more efficient than 2SLS, even under circumstances where 2SLS is consistent. Additionally, when easing local monotonicity to local stochastic monotonicity, our identification results still apply to subsets of compliers and defiers. Finally, we provide an empirical application, rejoining the endeavor of estimating returns to education using the quarter of birth instrument.

Keywords: Instrumental variable, treatment effects, LATE, local monotonicity

JEL Classification: C14, C21, C26

Suggested Citation

Dahl, Christian M. and Huber, Martin and Mellace, Giovanni, It's Never Too LATE: A New Look at Local Average Treatment Effects with or Without Defiers (February 14, 2017). Discussion Papers on Business and Economics, University of Southern Denmark, 2/2017. Available at SSRN: https://ssrn.com/abstract=2916599 or http://dx.doi.org/10.2139/ssrn.2916599

Christian M. Dahl

Department of Business and Economics ( email )

Campusvej 55
DK-5230 Odense M
Denmark
29125486 (Phone)

Martin Huber

University of Fribourg ( email )

Bd de PĂ©rolles 90
Fribourg, Fribourg CH-1700
Switzerland

Giovanni Mellace (Contact Author)

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark
+4565509294 (Phone)
65509294 (Fax)

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