Too LATE for Natural Experiments: A Critique of Local Average Treatment Effects Using the Example of Angrist and Evans (1998)

Stefan Öberg

No 25, Göteborg Papers in Economic History from University of Gothenburg, Unit for Economic History

Abstract: There has been a fundamental flaw in the conceptual design of many natural experiments used in the economics literature, particularly among studies aiming to estimate a local average treatment effect (LATE). When we use an instrumental variable (IV) to estimate a LATE, the IV only has an indirect effect on the treatment of interest. Such IVs do not work as intended and will produce severely biased and/or uninterpretable results. This comment demonstrates that the LATE does not work as previously thought and explains why using the natural experiment proposed by Angrist and Evans (1998) as the example.

Keywords: causal inference; natural experiment; local average treatment effect; complier average causal effect; instrumental variable (search for similar items in EconPapers)
JEL-codes: C21 C90 J13 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2019-11-05
New Economics Papers: this item is included in nep-ecm and nep-exp
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Citations: View citations in EconPapers (2)

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Working Paper: Too LATE for Natural Experiments: A Critique of Local Average Treatment Effects Using the Example of Angrist and Evans (1998) (2019)
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