Abstract
Summary When estimating local average and marginal treatment effects using instrumental variables (IVs), multivalued endogenous treatments are frequently converted to binary measures, supposedly to improve interpretability or policy relevance. Such binarisation introduces a violation of the IV exclusion if (a) the IV affects the multivalued treatment within support areas below and/or above the threshold and (b) such IV-induced changes in the multivalued treatment affect the outcome. We discuss assumptions that satisfy the IV exclusion restriction with a binarised treatment and permit identifying the average effect of (a) the binarised treatment and (b) unit-level increases in the original multivalued treatment among specific compliers. We derive testable implications of these assumptions and propose tests which we apply to the estimation of the returns to college graduation instrumented by college proximity.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
