Relaxing monotonicity in the identification of local average treatment effects

Martin Huber and Giovanni Mellace

No 1212, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: In heterogeneous treatment effect models with endogeneity, the identification of the local average treatment effect (LATE) typically relies on an instrument that satisfies two conditions: (i) joint independence of the potential post-instrument variables and the instrument and (ii) monotonicity of the treatment in the instrument, see Imbens and Angrist (1994). We show that identification is still feasible when replacing monotonicity by a strictly weaker local monotonicity condition. We demonstrate that the latter allows identifying the LATEs on the (i) compliers (whose treatment reacts to the instrument in the intended way), (ii) defiers (who react counter-intuitively), and (iii) both populations jointly. Furthermore, (i) and (iii) coincides with standard LATE if monotonicity holds. We also present an application to the quarter of birth instrument of Angrist and Krueger (1991).

Keywords: Instrumental variable; treatment effects; LATE; local monotonicity (search for similar items in EconPapers)
JEL-codes: C14 C21 C26 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2012-05
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (7)

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