 Pairwise valid instrumentsZhenting Sun and Kaspar Wüthrich Journal of Econometrics, 2025, vol. 250, issue C Abstract: Finding valid instruments is difficult. We propose Validity Set Instrumental Variable (VSIV) estimation, a method for estimating local average treatment effects (LATEs) in heterogeneous causal effect models when the instruments are partially invalid. We consider settings with pairwise valid instruments, that is, instruments that are valid for a subset of instrument value pairs. VSIV estimation exploits testable implications of instrument validity to remove invalid pairs and provides estimates of the LATEs for all remaining pairs, which can be aggregated into a single parameter of interest using researcher-specified weights. We show that the proposed VSIV estimators are asymptotically normal under weak conditions and remove or reduce the asymptotic bias relative to standard LATE estimators (that is, LATE estimators that do not use testable implications to remove invalid variation). We evaluate the finite sample properties of VSIV estimation in application-based simulations and apply our method to estimate the returns to college education using parental education as an instrument. Keywords: Invalid instruments; Local average treatment effects; Identification; Instrumental variable estimation; Asymptotic bias reduction (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:250:y:2025:i:c:s0304407625000636 DOI: 10.1016/j.jeconom.2025.106009 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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