A Practical Guide to Instrumental Variables Methods with Heterogeneous Treatment Effects
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arXiv
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| Format: | Preprint |
| Published: |
2026
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| _version_ | 1866914567655784448 |
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| author | Słoczyński, Tymon Sun, Liyang Uysal, S. Derya |
| author_facet | Słoczyński, Tymon Sun, Liyang Uysal, S. Derya |
| contents | Instrumental variables (IV) methods are central to applied microeconomics. While classical approaches assume linear models with constant effects, recent literature has shifted toward the local average treatment effect (LATE) framework to accommodate heterogeneous treatment effects. This paper provides a practical guide to aligning empirical practice with recent theory. We first examine how different specifications with covariates lead to distinct weighted averages of covariate-specific LATEs. We then discuss how parametric misspecification can undermine the causal interpretation of these estimands and suggest flexible specifications as essential robustness checks. Finally, we review formal tests for LATE assumptions and methods robust to monotonicity violations. We provide a guide to software implementations to help researchers apply the methods in practice. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2605_15115 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | A Practical Guide to Instrumental Variables Methods with Heterogeneous Treatment Effects Słoczyński, Tymon Sun, Liyang Uysal, S. Derya Econometrics Methodology Instrumental variables (IV) methods are central to applied microeconomics. While classical approaches assume linear models with constant effects, recent literature has shifted toward the local average treatment effect (LATE) framework to accommodate heterogeneous treatment effects. This paper provides a practical guide to aligning empirical practice with recent theory. We first examine how different specifications with covariates lead to distinct weighted averages of covariate-specific LATEs. We then discuss how parametric misspecification can undermine the causal interpretation of these estimands and suggest flexible specifications as essential robustness checks. Finally, we review formal tests for LATE assumptions and methods robust to monotonicity violations. We provide a guide to software implementations to help researchers apply the methods in practice. |
| title | A Practical Guide to Instrumental Variables Methods with Heterogeneous Treatment Effects |
| topic | Econometrics Methodology |
| url | https://arxiv.org/abs/2605.15115 |