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Instrument-based estimation with binarized treatments : issues and tests for the exclusion restriction

Andresen, Martin Eckhoff ; Huber, Martin

(Working Papers SES ; 492)

When estimating local average and marginal treatment effects using instrumental variables (IV), multivalued endogenous treatments are frequently binarized based on a specific threshold in treatment support. However, such binarization introduces a violation of the IV exclusion if (i) the IV affects the multivalued treatment within support areas below and/or above the threshold and (ii) such...