Identification and Extrapolation of Causal Effects with Instrumental Variables

Magne Mogstad and Alexander Torgovitsky

Annual Review of Economics, 2018, vol. 10, issue 1, 577-613

Abstract: Instrumental variables (IV) are widely used in economics to address selection on unobservables. Standard IV methods produce estimates of causal effects that are specific to individuals whose behavior can be manipulated by the instrument at hand. In many cases, these individuals are not the same as those who would be induced to treatment by an intervention or policy of interest to the researcher. The average causal effect for the two groups can differ significantly if the effect of the treatment varies systematically with unobserved factors that are correlated with treatment choice. We review the implications of this type of unobserved heterogeneity for the interpretation of standard IV methods and for their relevance to policy evaluation. We argue that making inferences about policy-relevant parameters typically requires extrapolating from the individuals affected by the instrument to the individuals who would be induced to treatment by the policy under consideration. We discuss a variety of alternatives to standard IV methods that can be used to rigorously perform this extrapolation. We show that many of these approaches can be nested as special cases of a general framework that embraces the possibility of partial identification.

Keywords: causal inference; extrapolation; instrumental variables; local average treatment effect; marginal treatment effects; partial identification (search for similar items in EconPapers)
JEL-codes: C21 C26 C36 C61 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1146/annurev-economics-101617-041813 (application/pdf)
Full text downloads are only available to subscribers. Visit the abstract page for more information.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anr:reveco:v:10:y:2018:p:577-613

Ordering information: This journal article can be ordered from
http://www.annualreviews.org/action/ecommerce

Access Statistics for this article

More articles in Annual Review of Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA.
Bibliographic data for series maintained by http://www.annualreviews.org ().