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IZA Discussion Paper No. 13613
August 2020
Two-Stage Least Squares Random Forests with an Application to Angrist and Evans (1998)
Martin Biewen, Philipp Kugler

shorter version published in: Economics Letters, 2021, 204, 109893

We develop the case of two-stage least squares estimation (2SLS) in the general framework of Athey et al. (Generalized Random Forests, Annals of Statistics, Vol. 47, 2019) and provide a software implementation for R and C++. We use the method to revisit the classic application of instrumental variables in Angrist and Evans (Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size, American Economic Review, Vol. 88, 1998). The two-stage least squares random forest allows one to investigate local heterogenous effects that cannot be investigated using ordinary 2SLS.

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