A note on testing instrument validity for the identification of LATE
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In this paper, we show that the testable implications derived in Huber and Mellace (Rev Econ Stat 97:398, 2015) are the best possible to detect invalid instruments in the presence of heterogeneous treatment effects and endogeneity. We also provide formal proof of the fact that those testable implications are only necessary, but not sufficient, conditions for instrument validity.
KeywordsTesting IV validity Local average treatment effect Moment inequalities Bounds
JEL ClassificationPC1 C4 C12
- Huber M, Laffers L, Mellace G Sharp IV bounds on average treatment effects on the treated and other populations under endogeneity and noncompliance. J Appl Econom (forthcoming)Google Scholar