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IZA Discussion Paper No. 18595
April 2026
Harnessing Genetic Variants for Local Average Treatment Effect Estimation
Michela Gianna Bia, Giorgia Menta, Martin Huber, Conchita D' Ambrosio

When multiple instruments are available, conventional instrumental variable estimators aggregate across heterogeneous margins of compliance, often yielding effects without a clear economic interpretation. This issue worsens when some instruments violate the exclusion restriction, as in settings using genetic variants. We propose a clustering-based plurality framework for instrumental variable estimation that addresses both instrument heterogeneity and invalid instruments. Rather than imposing a single causal parameter, our method groups instruments by similarity in the first stage and applies a plurality rule on subgroups with similar reduced-form relationships to identify locally valid subsets. This produces a set of margin-specific local average treatment effects instead of a single pooled estimate. We extend plurality-based identification to settings with non-mutually exclusive instruments, such as Mendelian Randomization designs. We illustrate the method in a two-sample Mendelian Randomization study of the effect of education on smoking. Results confirm a negative causal effect while revealing substantial heterogeneity across instrument-defined margins, masked by pooled IV approaches.

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