EconPapers    
Economics at your fingertips  
 

Characterizing the Instrumental Variable Identifying Assumption as Sample Selection Conditions

Christian Belzil () and Jorgen Hansen ()

No 6339, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We build on Rosenzweig and Wolpin (2000) and Keane (2010) and show that in order to fulfill the Instrumental variable (IV) identifying moment condition, a policy must be designed so that compliers and non-compliers either have the same average error term, or have an error term ratio equal to their relative share of the population. The former condition (labeled Choice Orthogonality) is essentially a no-selection condition. The latter one, referred to as Weighted Opposite Choices, may be viewed as a distributional (functional form) assumption necessary to match the degree of selectivity between compliers and noncompliers to their relative population proportions. Those conditions form a core of implicit IV assumptions that are present in any empirical applications. They allow the econometrician to gain substantial insight about the validity of a specific instrument, and they illustrate the link between identification and the statistical strength of an instrument. Finally, our characterization may also help designing a policy generating a valid instrument.

Keywords: instrumental variable methods; implicit assumptions; treatment effects (search for similar items in EconPapers)
JEL-codes: B4 C1 C3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://ftp.iza.org/dp6339.pdf (application/pdf)

Related works:
Working Paper: Characterizing the Instrumental Variable Identifying Assumption as Sample Selection Conditions (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp6339

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-10-17
Handle: RePEc:iza:izadps:dp6339