Journal
ECONOMETRICA
Volume 83, Issue 3, Pages 1199-1210Publisher
WILEY
DOI: 10.3982/ECTA10038
Keywords
Nonparametric identification; discrete instrument; strong exogeneity; monotonicity
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We study the identification through instruments of a nonseparable function that relates a continuous outcome to a continuous endogenous variable. Using group and dynamical systems theories, we show that full identification can be achieved under strong exogeneity of the instrument and a dual monotonicity condition, even if the instrument is discrete. When identified, the model is also testable. Our results therefore highlight the identifying power of strong exogeneity when combined with monotonicity restrictions.
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