An Odd Couple: Monotone Instrumental Variables and Binary Treatments

Jeremiah Richey ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates Monotone Instrumental Variables (MIV) and their ability to aid in identifying treatment effects when the treatment is binary in a nonparametric bounding framework. I show that an MIV can only aid in identification beyond that of a Monotone Treatment Selection assumption if for some region of the instrument the observed conditional-on-received-treatment outcomes exhibit monotonicity in the instrument in the opposite direction as that assumed by the MIV in a Simpson's Paradox-like fashion. Furthermore, an MIV can only aid in identification beyond that of a Monotone Treatment Response assumption if for some region of the instrument either the above Simpson's Paradox-like relationship exists or the instrument's indirect effect on the outcome (as through its influence on treatment selection) is the opposite of its direct effect as assumed by the MIV. The implications of the main findings for empirical work are discussed and the results are highlighted with an application investigating the effect of criminal convictions on job match quality using data from the 1997 National Longitudinal Survey of the Youth. Though the main results are shown to hold only for the binary treatment case in general, they are shown to have important implications for the multi-valued treatment case as well.

Keywords: Instrumental variables; Nonparametric bounds; Partial identification; Criminal convictions (search for similar items in EconPapers)
JEL-codes: C14 J63 K40 (search for similar items in EconPapers)
Date: 2013-06, Revised 2013-11-06
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/56999/1/MPRA_paper_54785.pdf revised version (application/pdf)

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