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TESTING FOR TREATMENT DEPENDENCE OF EFFECTS OF A CONTINUOUS TREATMENT

Published online by Cambridge University Press:  29 October 2014

Xun Lu  and
Habert White
Xun Lu*
Affiliation:
Hong Kong University of Science and Technology
Habert White
Affiliation:
University of California, San Diego
*
*Address correspondence to Xun Lu, Department of Economics, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong; e-mail: [email protected].
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Abstract

This paper provides nonparametric tests for hypotheses about the effects of a continuous treatment variable in a nonseparable structural equation. Specifically, we consider local average responses and average partial effects and test whether these effects are identical across different levels of treatment, including testing whether they are zero for all treatment levels as a special case. Our tests are based on consistent procedures of Bierens (1982, Journal of Econometrics 20, 105–134; 1990, Econometrica 58, 1443–1458) and Stinchcombe and White (1998, Econometric Theory 14, 295–324). The tests are easy to implement and achieve n-1/2 local power. Monte Carlo simulations show that the tests perform well in finite samples. We apply our tests to study the interest rate elasticities of loan demand in microfinance. We also extend our testing procedures to covariate-conditioned average effects and marginal effects.

Type
ARTICLES
Information
Econometric Theory , Volume 31 , Issue 5 , October 2015 , pp. 1016 - 1053
Copyright
Copyright © Cambridge University Press 2014 

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