When is the Local Average Treatment Close to the Average? Evidence from Fertility and Labor Supply


The local average treatment effect (LATE) may differ from the average treatment effect (ATE) when those influenced by the instrument are not representative of the overall population. Heterogeneity in treatment effects may imply that parameter estimates from 2SLS are uninformative regarding the average treatment effect, motivating a search for instruments that affect a larger share of the population. In this paper, I present and estimate a model of home production with heterogeneous costs and benefits to fertility. The results indicate that a sex-preference instrument in Taiwan produces IV estimates closer to the estimated ATE than in the United States, where sex preference is weaker.