Combining Matching and Nonparametric IV Estimation: Theory and an Application to the Evaluation of Active Labour Market Policies

Michael Lechner and Markus Froelich ()
Authors registered in the RePEc Author Service: Markus Frölich ()

University of St. Gallen Department of Economics working paper series 2010 from Department of Economics, University of St. Gallen

Abstract: In this paper, we show how instrumental variable and matching estimators can be combined in order to identify a broader array of treatment effects. Instrumental variable estimators are known to estimate effects only for the compliers, which often represent only a small subset of the entire population. By combining IV with matching, we can estimate also the treatment effects for the always- and never-takers. In our application to the active labour market programmes in Switzerland, we find large positive employment effects for at least 8 years after treatment for the compliers. On the other hand, the effects for the always- and never-participants are small. In addition, when examining the potential outcomes separately, we find that the compliers have the worst employment outcomes without treatment. Hence, the assignment policy of the caseworkers was inefficient in that the always-participants were neither those with the highest treatment effect nor those with the largest need for assistance.

Keywords: Local average treatment effect; conditional local IV; matching estimation; heterogeneous treatment effects; active labour market policy; state borders; geographic variation. (search for similar items in EconPapers)
JEL-codes: C14 C2 J68 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-06
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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