Independence, Monotonicity, and Latent Index Models: An Equivalence Result
Posted: 17 Jul 2002
The selection model and instrumental variable, local average treatment effect (LATE) framework are widely interpreted as alternative, competing frameworks. This note shows that the assumption of an unobserved index crossing a threshold that defines the selection model is equivalent to the independence and monotonicity assumptions at the center of the LATE approach. The underlying assumptions of the two approaches are equivalent.
Keywords: selection model, latent index model, instrumental variables, social program evaluation, local average treatment effect
JEL Classification: C34, H43
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