Monash University
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Decomposing Identification Gains and Evaluating Instrument Identification Power

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journal contribution
posted on 2022-11-10, 03:47 authored by Lina Zhang, David T. Frazier, Don S. Poskitt, Xueyan Zhao
This paper examines the identification power of instrumental variables (IVs) for average treatment effect (ATE) in partially identified models. We decompose the ATE identification gains into components of contributions driven by IV relevancy, IV strength, direction and degree of treatment endogeneity, and matching via exogenous covariates. Our decomposition is demonstrated with graphical illustrations, simulation studies and an empirical example of childbearing and women's labour supply. Our analysis offers insights for understanding the complex role of IVs in ATE identification and for selecting IVs in practical policy designs. Simulations also suggest potential uses of our analysis for detecting irrelevant instruments.

History

Classification-JEL

C14, C31, C35, C36

Creation date

2021-11-13

Working Paper Series Number

21/21

Length

56 pp

File-Format

application/pdf

Handle

RePEc:msh:ebswps:2021-21