Understanding IV Versus OLS Estimates of Treatment Effects and the Coefficient Difference Check

David J. Bjerk ()
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David J. Bjerk: Claremont McKenna College

No 18274, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This article derives an equation characterizing the difference between OLS and IV coefficients under potentially heterogenous treatment effects. This leads to what I call the Coefficient Difference Check, which consists of checking that the difference between the estimated OLS and IV coefficients has the same sign as the expected selection effect. I show failures of this check can arise because: IV is invalid, the expected selection story is incorrect, or there are particular heterogenous treatment effects that imply the IV estimate is both “fragile” and that it provides a more biased estimate of the ATT than OLS. Failures of this check are relatively common in the literature. I describe best practices given such failures.

Keywords: adjudicator propensity to treat IV; judge fixed-effects; average treatment-on-the-treated; heterogenous treatment effects; selection; instrumental variables; examiner tendency IV; returns to schooling (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-ecm and nep-inv
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