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Partial Identification of Local Average Treatment Effects With an Invalid Instrument

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  • Carlos A. Flores
  • Alfonso Flores-Lagunes

Abstract

We derive nonparametric bounds for local average treatment effects (LATE) without imposing the exclusion restriction assumption or requiring an outcome with bounded support. Instead, we employ assumptions requiring weak monotonicity of mean potential and counterfactual outcomes within or across subpopulations defined by the values of the potential treatment status under each value of the instrument. The key element in our derivation is a result relating LATE to a causal mediation effect, which allows us to exploit partial identification results from the causal mediation analysis literature. The bounds are employed to analyze the effect of attaining a GED, high school, or vocational degree on future labor market outcomes using randomization into a training program as an invalid instrument. The resulting bounds are informative, indicating that the local effect when assigned to training for those whose degree attainment is affected by the instrument is at most 12.7 percentage points on employment and $64.4 on weekly earnings.

Suggested Citation

  • Carlos A. Flores & Alfonso Flores-Lagunes, 2013. "Partial Identification of Local Average Treatment Effects With an Invalid Instrument," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(4), pages 534-545, October.
    • Handle: RePEc:taf:jnlbes:v:31:y:2013:i:4:p:534-545
    DOI: 10.1080/07350015.2013.822760
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    References listed on IDEAS

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    1. Peter Z. Schochet & John Burghardt & Steven Glazerman, 2001. "National Job Corps Study: The Impacts of Job Corps on Participants' Employment and Related Outcomes," Mathematica Policy Research Reports db6c4204b8e1408bb0c6289ec, Mathematica Policy Research.
    2. repec:mpr:mprres:2951 is not listed on IDEAS
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