Abadie's Kappa and Weighting Estimators of the Local Average Treatment Effect

Tymon Słoczyński, Selver Uysal and Jeffrey Wooldridge

No 15241, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we study the finite sample and asymptotic properties of various weighting estimators of the local average treatment effect (LATE), several of which are based on Abadie (2003)'s kappa theorem. Our framework presumes a binary endogenous explanatory variable ("treatment") and a binary instrumental variable, which may only be valid after conditioning on additional covariates. We argue that one of the Abadie estimators, which we show is weight normalized, is likely to dominate the others in many contexts. A notable exception is in settings with one-sided noncompliance, where certain unnormalized estimators have the advantage of being based on a denominator that is bounded away from zero. We use a simulation study and three empirical applications to illustrate our findings. In applications to causal effects of college education using the college proximity instrument (Card, 1995) and causal effects of childbearing using the sibling sex composition instrument (Angrist and Evans, 1998), the unnormalized estimates are clearly unreasonable, with "incorrect" signs, magnitudes, or both. Overall, our results suggest that (i) the relative performance of different kappa weighting estimators varies with features of the data-generating process; and that (ii) the normalized version of Tan (2006)'s estimator may be an attractive alternative in many contexts. Applied researchers with access to a binary instrumental variable should also consider covariate balancing or doubly robust estimators of the LATE.

Keywords: one-sided noncompliance; local average treatment effects; instrumental variables; weighting (search for similar items in EconPapers)
JEL-codes: C21 C26 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-04
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

Published - published in: Journal of Business & Economic Statistics, 2024, 43 (1), 164–177

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Related works:
Journal Article: Abadie’s Kappa and Weighting Estimators of the Local Average Treatment Effect (2025)
Working Paper: Abadie's Kappa and Weighting Estimators of the Local Average Treatment Effect (2024)
Working Paper: Abadie's kappa and weighting estimators of the local average treatment effect (2023)
Working Paper: Abadie's Kappa and Weighting Estimators of the Local Average Treatment Effect (2023)
Working Paper: Abadie's Kappa and Weighting Estimators of the Local Average Treatment Effect (2022)
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