Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241957 
Year of Publication: 
2021
Series/Report no.: 
cemmap working paper No. CWP21/21
Publisher: 
Centre for Microdata Methods and Practice (cemmap), London
Abstract: 
This paper proposes a unified approach to derive sharp bounds on all conventional policy parameters when the instrumental variables (IVs) are potentially invalid. Using a Vine Copula approach, we propose a novel characterization of the identified sets for the marginal treatment effect (MTE) and the policy-relevant treatment effect (PRTE) parameters. Our method has various advantages: First, it explicitly demonstrates how imposing different IV-related assumptions with different credibility levels affects the MTE and PRTE's identified set. Second, it can be used to test model specifications and hypotheses about various imperfect IV-related assumptions. Third, it provides a tractable way to inform policy choices in the presence of uncertainty of the validity of identifying assumptions. Our approach enlarges the MTE framework's scope by showing how it can be used to inform policy decisions even when valid instruments are not available.
Subjects: 
Desegregated MTE
Vine Copula
Identified Set
Policy-relevant treatment effect
Specification Test
JEL: 
C12
C14
C21
C26
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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