Arbeitspapier

An economic analysis of exclusion restrictions for instrumental variable estimation

Instrumental variable estimation requires untestable exclusion restrictions. With policy effects on individual outcomes, there is typically a time interval between the moment the agent realizes that he may be exposed to the policy and the actual exposure or the announcement of the actual treatment status. In such cases there is an incentive for the agent to acquire information on the value of the IV. This leads to violation of the exclusion restriction. We analyze this in a dynamic economic model framework. This provides a foundation of exclusion restrictions in terms of economic behavior. The results are used to describe policy evaluation settings in which instrumental variables are likely or unlikely to make sense. For the latter cases we analyze the asymptotic bias. The exclusion restriction is more likely to be violated if the outcome of interest strongly depends on interactions between the agent's effort before the outcome is realized and the actual treatment status. The bias has the same sign as this interaction effect. Violation does not causally depend on the weakness of the candidate instrument or the size of the average treatment effect. With experiments, violation is more likely if the treatment and control groups are to be of similar size. We also address side-effects. We develop a novel economic interpretation of placebo effects and provide some empirical evidence for the relevance of the analysis.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 2585

Klassifikation
Wirtschaft
Thema
Politik
Verhaltensökonomik
Dynamisches Modell

Ereignis
Geistige Schöpfung
(wer)
van den Berg, Gerard J.
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2007

Handle
URN
urn:nbn:de:101:1-2008042593
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
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Objekttyp

  • Arbeitspapier

Beteiligte

  • van den Berg, Gerard J.
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2007

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