1 Department of Business and Economics, Faculty of Business and Social Sciences, SDU2 COHERE, Department of Business and Economics, Faculty of Business and Social Sciences, SDU3 University of Fribourg4 Department of Business and Economics, Faculty of Business and Social Sciences, SDU
We derive testable implications of instrument validity in just identified treatment effect models with endogeneity and consider several tests. The identifying assumptions of the local average treatment effect allow us to both point identify and bound the mean potential outcomes (i) of the always takers under treatment and (ii) of the never takers under non-treatment. The point identified means must lie within their respective bounds, which provides us with four testable inequality moment constraints. Finally, we adapt our testing framework to the identification of distributional features. A brief simulation study and an application to labor market data are also provided.
Review of Economics and Statistics, 2015, Vol 97, Issue 2