Monotone Instrumental Variables with an Application to the Returns to Schooling

Charles Manski and John Pepper

No 224, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: Econometric analyses of treatment response commonly use instrumental variable (IV) assumptions to identify treatment effects. Yet the credibility of IV assumptions is often a matter of considerable disagreement, with much debate about whether some covariate is or is not a "valid instrument" in an application of interest. There is therefore good reason to consider weaker but more credible assumptions. assumptions. To this end, we introduce monotone instrumental variable (MIV) A particularly interesting special case of an MIV assumption is monotone treatment selection (MTS). IV and MIV assumptions may be imposed alone or in combination with other assumptions. We study the identifying power of MIV assumptions in three informational settings: MIV alone; MIV combined with the classical linear response assumption; MIV combined with the monotone treatment response (MTR) assumption. We apply the results to the problem of inference on the returns to schooling. We analyze wage data reported by white male respondents to the National Longitudinal Survey of Youth (NLSY) and use the respondent's AFQT score as an MIV. We find that this MIV assumption has little identifying power when imposed alone. However combining the MIV assumption with the MTR and MTS assumptions yields fairly tight bounds on two distinct measures of the returns to schooling.

Date: 1998-02
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Published as Manski, Charles F. and John V. Pepper. "Monotone Instrumental Variables With An Application To The Returns To Schooling," Econometrica, 2000, v68(4,Jul), 997-1010.

Downloads: (external link)
http://www.nber.org/papers/t0224.pdf (application/pdf)

Related works:
Journal Article: Monotone Instrumental Variables, with an Application to the Returns to Schooling (2000)
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:nbr:nberte:0224

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/t0224

Access Statistics for this paper

More papers in NBER Technical Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().