TY  - RPRT
        AU  - Krumme, Anna
AU  - Westphal, Matthias
        TI  - Testing IV Validity and LATE Interpretation Using Flexible Covariate Specifications
        PY  - 2026/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18573
        UR  - https://www.iza.org/publications/dp18573
        AB  - Building on the testable implications for IV validity underlying local average treatment effect (LATE) estimation, we (i) propose a simple testing procedure that may accommodate high-dimensional covariates and (ii) demonstrate that it can also detect biases arising from misspecified IV regression models. While recent research has highlighted the importance of a correct covariate specification, existing IV validity tests are not designed to capture this source of bias. Simulation studies strongly suggest that the test performs well at detecting violations of conditional independence, violations of the exclusion restriction, and biases arising from covariate misspecification.
        KW  - testing instrument validity
KW  - local average treatment effects
KW  - covariate misspecification
        ER  -