NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cole G. Chapman

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NBER Working Papers and Publications

September 2017Comparing 2SLS vs 2SRI for Binary Outcomes and Binary Exposures
with Anirban Basu, Norma Coe: w23840
This study uses Monte Carlo simulations to examine the ability of the two-stage least-squares (2SLS) estimator and two-stage residual inclusion (2SRI) estimators with varying forms of residuals to estimate the local average and population average treatment effect parameters in models with binary outcome, endogenous binary treatment, and single binary instrument. The rarity of the outcome and the treatment are varied across simulation scenarios. Results show that 2SLS generated consistent estimates of the LATE and biased estimates of the ATE across all scenarios. 2SRI approaches, in general, produce biased estimates of both LATE and ATE under all scenarios. 2SRI using generalized residuals minimizes the bias in ATE estimates. Use of 2SLS and 2SRI is illustrated in an empirical application ...
 
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