Identification and Estimation of Unconditional Policy Effects of an Endogenous Binary Treatment: an Unconditional MTE Approach

Julian Martínez-Iriarte and Yixiao Sun

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: This paper studies the identification and estimation of unconditional policy effects when the treatment is binary and endogenous. We first characterize the asymptotic bias of the unconditional regression estimator that ignores the endogeneity and elaborate on the channels that the endogeneity can render the unconditional regressor estimator inconsistent. We show that even if the treatment status is exogenous, the unconditional regression estimator can still be inconsistent when there are common covariates affecting both the treatment status and the outcome variable. We introduce a new class of marginal treatment effects (MTE) based on the influence function of the functional underlying the policy target. We show that an unconditional policy effect can be represented as a weighted average of the newly defined MTEs over the individuals at the margin of indifference. Point identification is achieved using the local instrumental variable approach. Furthermore, the unconditional policy effects are shown to include the marginal policy-relevant treatment effect in the literature as a special case. Methods of estimation and inference for the unconditional policy effects are provided. In the empirical application, we estimate the effect of changing college enrollment status, induced by higher tuition subsidy, on the quantiles of the wage distribution.

Keywords: Social and Behavioral Sciences; unconditional quantile regressions; unconditional policy effect; selection models; instrumental variables; marginal treatment effect; marginal policy-relevant treatment effect. (search for similar items in EconPapers)
Date: 2021-07-22
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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