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From LATE to MTE: Alternative methods for the evaluation of policy interventions

Cornelissen, T; Dustmann, C; Raute, A; Schonberg, U; (2016) From LATE to MTE: Alternative methods for the evaluation of policy interventions. Labour Economics , 41 pp. 47-60. 10.1016/j.labeco.2016.06.004. Green open access

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Abstract

This paper provides an introduction into the estimation of marginal treatment effects (MTE). Compared to the existing surveys on the subject, our paper is less technical and speaks to the applied economist with a solid basic understanding of econometric techniques who would like to use MTE estimation. Our framework of analysis is a generalized Roy model based on the potential outcomes framework, within which we define different treatment effects of interest, and review the well-known case of IV estimation with a discrete instrument resulting in a local average treatment effect (LATE). Turning to IV estimation with a continuous instrument, we demonstrate that the 2SLS estimator may be viewed as a weighted average of LATEs and discuss MTE estimation as an alternative and more informative way of exploiting a continuous instrument. We clarify the assumptions underlying the MTE framework, its relation to the correlated random coefficients model, and illustrate how the MTE estimation is implemented in practice.

Type: Article
Title: From LATE to MTE: Alternative methods for the evaluation of policy interventions
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.labeco.2016.06.004
Publisher version: http://dx.doi.org/10.1016/j.labeco.2016.06.004
Language: English
Additional information: Copyright © 2016 Elsevier B.V. All rights reserved. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Keywords: Social Sciences, Economics, Business & Economics, Marginal treatment effects, Instrumental variables, Heterogeneous effects, Disability Insurance Receipt, Instrumental Variables, Dependent Variables, Self-selection, Models, Identification, Heterogeneity, Average, Education, Programs
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/1529584
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