A bootstrap test for instrument validity in heterogeneous treatment effect models

Toru Kitagawa ()
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Toru Kitagawa: Institute for Fiscal Studies and University College London

No CWP53/13, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: This paper develops a specification test for the instrument validity conditions in the heterogeneous treatment effect model with a binary treatment and a discrete instrument. A necessary testable implication for the joint restriction of instrument exogeneity and instrument monotonicity is given by nonnegativity of point-identifiable complier's outcome densities. Our specification test infers this testable implication using a Kolmogorov-Smirnov type test statistic. We provide a bootstrap algorithm to implement the proposed test and show its asymptotic validity. The proposed test procedure can apply to both discrete and continuous outcome cases.

Date: 2013-10-15
New Economics Papers: this item is included in nep-dcm and nep-ecm
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