TESTING FOR TREATMENT DEPENDENCE OF EFFECTS OF A CONTINUOUS TREATMENT

Abstract

This paper provides nonparametric tests for hypotheses about the effects of acontinuoustreatment variable in a nonseparable structural equation. Specifically, we consider local average responses and average partial effects and test whether these effects are identical across different levels of treatment, including testing whether they are zero for all treatment levels as a special case. Our tests are based on consistent procedures of Bierens (1982,Journal of Econometrics20, 105–134; 1990,Econometrica58, 1443–1458) and Stinchcombe and White (1998,Econometric Theory14, 295–324). The tests are easy to implement and achieven-1/2local power. Monte Carlo simulations show that the tests perform well in finite samples. We apply our tests to study the interest rate elasticities of loan demand in microfinance. We also extend our testing procedures to covariate-conditioned average effects and marginal effects.