Non-testability of instrument validity under continuous endogenous variables

Florian Gunsilius

Papers from arXiv.org

Abstract: This note presents a proof of the conjecture in \citet*{pearl1995testability} about testing the validity of an instrumental variable in hidden variable models. It implies that instrument validity cannot be tested in the case where the endogenous treatment is continuously distributed. This stands in contrast to the classical testability results for instrument validity when the treatment is discrete. However, imposing weak structural assumptions on the model, such as continuity between the observable variables, can re-establish theoretical testability in the continuous setting.

Date: 2018-06, Revised 2020-11
New Economics Papers: this item is included in nep-ecm
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