Journal
ECONOMETRICA
Volume 83, Issue 5, Pages 2043-2063Publisher
WILEY-BLACKWELL
DOI: 10.3982/ECTA11974
Keywords
Treatment effects; instrumental variable; specification test; bootstrap
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Funding
- ESRC through ESRC Center for Microdata Methods and Practice (CEMMAP) [RES-589-28-0001]
- Merit Dissertation Fellowship from Graduate School of Economics in Brown University
- ESRC [ES/I034021/1] Funding Source: UKRI
- Economic and Social Research Council [ES/I034021/1] Funding Source: researchfish
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This paper develops a specification test for instrument validity in the heterogeneous treatment effect model with a binary treatment and a discrete instrument. The strongest testable implication for instrument validity is given by the condition for nonnegativity of point-identifiable compliers' outcome densities. Our specification test infers this testable implication using a variance-weighted Kolmogorov-Smirnov test statistic. The test can be applied to both discrete and continuous outcome cases, and an extension of the test to settings with conditioning covariates is provided.
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