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The identification region of the potential outcome distributions under instrument independence

Kitagawa, T; (2021) The identification region of the potential outcome distributions under instrument independence. Journal of Econometrics 10.1016/j.jeconom.2021.03.006. (In press). Green open access

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Abstract

This paper examines the identifying power of instrument exogeneity in the treatment effect model. We derive the identification region of the potential outcome distributions, which are the collection of distributions that are compatible with data and with the restrictions of the model. We consider identification when (i) the instrument is independent of each of the potential outcomes (marginal independence), (ii) the instrument is independent of the potential outcomes and selection heterogeneity jointly (joint independence), and (iii.) the instrument satisfies joint independence and monotonicity (the LATE restriction). By comparing the size of the identification region under each restriction, we show that joint independence provides more identifying information for the potential outcome distributions than marginal independence, but that the LATE restriction provides no identification gain beyond joint independence. We also, under each restriction, derive sharp bounds for the Average Treatment Effect and sharp testable implication to falsify the restriction. Our analysis covers discrete or continuous outcomes, and extends the Average Treatment Effect bounds of Balke and Pearl (1997) developed for the dichotomous outcome case to a more general setting.

Type: Article
Title: The identification region of the potential outcome distributions under instrument independence
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jeconom.2021.03.006
Publisher version: https://doi.org/10.1016/j.jeconom.2021.03.006
Language: English
Additional information: © 2021 The Author. Published by Elsevier B.V. under a Creative Commons license (https://creativecommons.org/licenses/by/4.0/).
Keywords: Partial identification, Treatment effects, Instrumental variables
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10124714
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