What do instrumental variable models deliver with discrete dependent variables?

Chesher, Andrew and Rosen, Adam (2013) What do instrumental variable models deliver with discrete dependent variables? Technical Report. IFS, cemmap website.

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Official URL: http://www.cemmap.ac.uk/cemmap/publication/id/6643

Abstract

We study models with discrete endogenous variables and compare the use of two stage least squares (2SLS) in a linear probability model with bounds analysis using a nonparametric instrumental variable model. 2SLS has the advantage of providing an easy to compute point estimator of a slope coe¢ cient which can be interpreted as a local average treatment effect (LATE). However, the 2SLS estimator does not measure the value of other useful treatment e¤ect parameters without invoking untenable restrictions. The nonparametric instrumental variable (IV) model has the advantage of being weakly restrictive, so more generally applicable, but it usually delivers set identi�cation. Nonetheless it can be used to consistently estimate bounds on many parameters of interest including, for example, average treatment effects. We illustrate using data from Angrist & Evans (1998) and study the effect of family size on female employment.

Item Type:Working Paper (Technical Report)
Subjects:5. Quantitative Data Handling and Data Analysis > 5.10 Latent Variable Models
5. Quantitative Data Handling and Data Analysis > 5.10 Latent Variable Models > 5.10.8 Structural equation models
ID Code:3138
Deposited By: PEPA User
Deposited On:27 Jun 2013 15:54
Last Modified:27 Jun 2013 15:54

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