Sharp Bounds on the Distribution of the Treatment Effect in Switching Regimes Models


Econometrics Seminar
University of Pennsylvania

3718 Locust Walk
410 McNeil

Philadelphia, PA

United States

Joint with: Jisong Wu

In this paper, we establish sharp bounds on the distribution of the treatment effect in switching regimes models or generalized sample selection models in Heckman (1990). These
bounds depend on the identified model parameters only and hence are themselves identified. Their estimation is straightforward once the identified model parameters are estimated. We compare our bounds when the identified bivariate marginal distributions are either both normal
or both Student’s t with those assuming trivariate normal or trivariate Student’s t distribution, where the latter bounds follow from existing sharp bounds on the correlation between the outcome errors. To illustrate the usefulness of the distribution bounds established in this paper, we apply them to a wage earnings model for child laborers in the early 1900s, where regimes are governed according to literacy.

For more information, contact Frank Schorfheide.

Yanqin Fan

Vanderbilt University

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