• DOI:10.2139/ssrn.3842328
• Corpus ID: 226956044

When Should We (Not) Interpret Linear IV Estimands as Late?

@article{Sloczynski2020WhenSW,
  title={When Should We (Not) Interpret Linear IV Estimands as Late?},
  author={Tymon Sloczy'nski},
  journal={SSRN Electronic Journal},
  year={2020}
}

• Tymon Sloczy'nski
• Published 13 November 2020
• Economics
• SSRN Electronic Journal

In this paper I revisit the interpretation of the linear instrumental variables (IV) estimand as a weighted average of conditional local average treatment effects (LATEs). I focus on a practically relevant situation in which additional covariates are required for identification but the reduced-form and first-stage regressions are possibly misspecified as a result of neglected heterogeneity in the effects of the instrument. If we also allow for conditional monotonicity, i.e. the existence of compliers but no defiers at some covariate values and the existence of defiers but no compliers elsewhere, then the weights on some conditional LATEs are negative and the IV estimand is no longer interpretable as a causal effect. Even if monotonicity holds unconditionally, the IV estimand is not interpretable as the unconditional LATE parameter unless the groups that are encouraged and not encouraged to get treated are roughly equal sized.