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  3. American Economic Review
  4. May 2013
  5. What Do Instrumental Variable Models Deliver with Discrete Dependent Variables?

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

What Do Instrumental Variable Models Deliver with Discrete Dependent Variables?

  • Andrew Chesher
  • Adam M. Rosen
American Economic Review
vol. 103, no. 3, May 2013
(pp. 557–62)
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Abstract

We compare nonparametric instrumental variables (IV) models with linear models and 2SLS methods when dependent variables are discrete. A 2SLS method can deliver a consistent estimator of a Local Average Treatment Effect but is not informative about other treatment effect parameters. The IV models set identify a range of interesting structural and treatment effect parameters. We give set identification results for a counterfactual probability and an Average Treatment Effect in a IV binary threshold crossing model. We illustrate using data on female employment and family size (employed by Joshua Angrist and William Evans (1998)) and compare with their LATE estimates.

Citation

Chesher, Andrew, and Adam M. Rosen. 2013. "What Do Instrumental Variable Models Deliver with Discrete Dependent Variables?" American Economic Review, 103 (3): 557–62. DOI: 10.1257/aer.103.3.557

Additional Materials

JEL Classification

  • C26 Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation