A Test for Instrument Validity

Toru Kitagawa

Econometrica, 2015, vol. 83, issue 5, 2043-2063

Abstract: This paper develops a specification test for instrument validity in the heterogeneous treatment effect model with a binary treatment and a discrete instrument. The strongest testable implication for instrument validity is given by the condition for nonnegativity of point‐identifiable compliers' outcome densities. Our specification test infers this testable implication using a variance‐weighted Kolmogorov–Smirnov test statistic. The test can be applied to both discrete and continuous outcome cases, and an extension of the test to settings with conditioning covariates is provided.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:83:y:2015:i:5:p:2043-2063

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