Philip Marx, Harvard University

Within Compliers and Beyond: Sharp Bounds in Instrumental Variable Models
Tuesday, 14 January 2020 - 11:30 am to 1:00 pm
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Catherine Deri Armstrong
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Free of charge
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This paper derives sharp, analytical bounds on counterfactual outcomes and treatment effects in the canonical instrumental variable model with binary and monotone treatment decisions. These bounds strictly improve over the strongest computational bounds available in the literature. The simultaneous improvement in power and interpretability stems from considering empirical consistency with respect to the distributions of observed data, rather than only observed means, combined with a novel set of methods for harnessing the additional empirical content. A generalized framework allows for the derivation of sharp bounds in a variety of common extensions. As main examples, the paper analytically derives sharp bounds on treatment effects for a common choice-theoretic variant, the extended Roy Model. In addition, the method recovers and extends existing sharp bounds on the average treatment effect where outcomes are bounded, as well as suggesting alternative sets of assumptions for meaningful extrapolation beyond compliers.