Local Instruments, Global Extrapolation: External Validity of the Labor Supply–Fertility Local Average Treatment Effect

Abstract

We investigate the external validity of local average treatment effects (LATEs), specifically Angrist and Evans’s use of same sex of the two first children as an instrumental variable for the effect of fertility on labor supply. We estimate their specification in 139 country-year censuses using Integrated Public Use Microdata Sample–International data. We compare each country-year’s actual LATE to the extrapolated LATE from other country-years. We find that, with a sufficiently large reference sample, we extrapolate the treatment effect reasonably well, but the degree of accuracy depends on the extent of covariate similarity between the target and reference settings.