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Concave-Monotone Treatment Response and Monotone Treatment Selection: With an Application to the Returns to Schooling

Tsunao Okumura and Emiko Usui

No 4986, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper identifies sharp bounds on the mean treatment response and average treatment effect under the assumptions of both concave monotone treatment response (concave-MTR) and monotone treatment selection (MTS). We use our bounds and the US National Longitudinal Survey of Youth to estimate mean returns to schooling. Our upper-bound estimates are substantially smaller than (1) estimates using only the concave-MTR assumption of Manski (1997) and (2) estimates using only the MTR and MTS assumptions of Manski and Pepper (2000). They fall in the lower range of the point estimates given in previous studies that assume linear wage functions. This is because ability bias is corrected by assuming MTS when the functions are close to linear. Our results therefore imply that higher returns reported in previous studies are likely to be overestimated.

Keywords: returns to schooling; nonparametric methods; partial identification; sharp bounds; treatment response (search for similar items in EconPapers)
JEL-codes: C14 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2010-06
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Published in: Quantitative Economics, 2014, 5 (1), 175-194 [Online]

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Related works:
Journal Article: Concave‐monotone treatment response and monotone treatment selection: With an application to the returns to schooling (2014) Downloads
Working Paper: Concave-Monotone Treatment Response and Monotone Treatment Selection: With an Application to the Returns to Schooling (2010) Downloads
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