Scandinavian Working Papers in Economics
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Department of Business and Economics, University of Southern Denmark Discussion Papers of Business and Economics
Department of Business and Economics, University of Southern Denmark

No 4/2015:
A Note on Testing the LATE Assumptions

Lukas Laffers () and Giovanni Mellace ()

Abstract: In this paper we show that the testable implications derived in Huber and Mellace (2013) are the best possible to detect invalid instruments, in the presence of heterogeneous treatment effects and endogeneity. We also provide a formal proof of the fact that those testable implications are only necessary but not sufficient conditions for instrument validity.

Keywords: Testing IV validity; Local average treatment effect; Moment inequalities; Bounds; (follow links to similar papers)

JEL-Codes: C12; C21; C26; (follow links to similar papers)

6 pages, March 3, 2015

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