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A Test for Instrument Validity

Authors: Toru Kitagawa
Date: 19 August 2014
Type: cemmap Working Paper, CWP34/14
DOI: 10.1920/wp.cem.2014.3414


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 non-negativity of point- identifiable complier’s outcome densities. Our specification test infers this testable implication using a variance-weighted Kolmogorov-Smirnov test statistic. Implementation of the proposed test does not require smoothing parameters, even though the testable implications involve non-parametric densities. 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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Now published:
Toru Kitagawa September 2015, A Test for Instrument Validity, Journal article, Wiley
Previous version:
Toru Kitagawa October 2013, A bootstrap test for instrument validity in heterogeneous treatment effect models, cemmap Working Paper, Institute for Fiscal Studies

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