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http://hdl.handle.net/10419/58484
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| Title: | | Characterizing the instrumental variable identifying assumption as sample selection conditions  |
| Authors: | | Belzil, Christian Hansen, Jörgen |
| Issue Date: | | 2012 |
| Series/Report no.: | | Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6339 |
| Abstract: | | We build on Rosenzweig and Wolpin (2000) and Keane (2010) and show that in order to fulfill the Instrumental variable (IV) identifying moment condition, a policy must be designed so that compliers and non-compliers either have the same average error term, or have an error term ratio equal to their relative share of the population. The former condition (labeled Choice Orthogonality) is essentially a no-selection condition. The latter one, referred to as Weighted Opposite Choices, may be viewed as a distributional (functional form) assumption necessary to match the degree of selectivity between compliers and noncompliers to their relative population proportions. Those conditions form a core of implicit IV assumptions that are present in any empirical applications. They allow the econometrician to gain substantial insight about the validity of a specific instrument, and they illustrate the link between identification and the statistical strength of an instrument. Finally, our characterization may also help designing a policy generating a valid instrument. |
| Subjects: | | instrumental variable methods implicit assumptions treatment effects |
| JEL: | | B4 C1 C3 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-201205026057 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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