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
Date Written: February 14, 2017
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: Suggested Citation