On Heckits, LATE, and Numerical Equivalence

DOI10.3982/ECTA15444zbMATH Open1420.62492arXiv1706.05982OpenAlexW3006040094MaRDI QIDQ5225129FDOQ5225129

Authors: Patrick Kline, Christopher R. Walters 

Publication date: 19 July 2019

Published in: Econometrica (Search for Journal in Brave)

Abstract: Structural econometric methods are often criticized for being sensitive to functional form assumptions. We study parametric estimators of the local average treatment effect (LATE) derived from a widely used class of latent threshold crossing models and show they yield LATE estimates algebraically equivalent to the instrumental variables (IV) estimator. Our leading example is Heckman's (1979) two-step ("Heckit") control function estimator which, with two-sided non-compliance, can be used to compute estimates of a variety of causal parameters. Equivalence with IV is established for a semi-parametric family of control function estimators and shown to hold at interior solutions for a class of maximum likelihood estimators. Our results suggest differences between structural and IV estimates often stem from disagreements about the target parameter rather than from functional form assumptions per se. In cases where equivalence fails, reporting structural estimates of LATE alongside IV provides a simple means of assessing the credibility of structural extrapolation exercises.

Full work available at URL: https://arxiv.org/abs/1706.05982

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zbMATH Keywords

instrumental variablesselection modelstreatment effectscontrol functionselectivity biasparametric estimatorsmarginal treatment effects

Mathematics Subject Classification ID

Point estimation (62F10) Applications of statistics to economics (62P20)

Cited In (2)

• Sharp bounds in the latent index selection model
• From LATE to ATE: a Bayesian approach

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