Sensitivity of Policy Relevant Treatment Parameters to Violations of Monotonicity

Luther Yap
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Luther Yap: Princeton University

Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper proposes a method in an environment with heterogeneous treatment effects to bound policy relevant treatment parameters (PRTP) without the monotonicity assumption that the instrumental variable works in the same direction for all individuals. While the procedure applies to all PRTP objects, this paper provides a detailed analysis for local average treatment effects in counterfactual environments (LATE*) that does not yet have a procedure for sensitivity analysis to monotonicity violations. The bounding framework uses the proportion of defiers relative to compliers as a sensitivity parameter and yields an identified set that is an interval. The bounds are sharp for binary outcomes. The method is illustrated in an example where the same sex instrument is used to find the effect of having a third child on labor force participation. I find that bounds are informative only for small violations in monotonicity.

Keywords: Instrumental variables; treatment effects; local average treatment effect; LATE; policy relevant treatment parameters; partial identification; monotonicity; sensitivity analysis (search for similar items in EconPapers)
JEL-codes: C26 C61 (search for similar items in EconPapers)
Date: 2022-08
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