New IZA DPs -- Methods & Models
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IZA DP Alerts
May 22, 2026, 9:09:20 AMMay 22
to it...@umich.edu
IZA Discussion Papers
Dear Italo Gutierrez,
These new IZA Discussion Papers are now available online.
DP 18501 - Zenou:
Peer vs. Network Effects: Microfoundations, Identification, and Beyond
DP 18511 - Buhai:
The Geometry of Heterogeneous Extremes: Optimal Transport and Entropic Design
DP 18560 - Gotoh/Kambayashi:
Empirical Challenges in the Capability Approach: Measuring Capability Sets and Unfreedom through Counterfactual Comparisons
DP 18573 - Krumme/Westphal:
Testing IV Validity and LATE Interpretation Using Flexible Covariate Specifications
DP 18594 - Acerenza/Bartalotti/Veneri:
Testing Identifying Assumptions in Tobit Models
DP 18595 - Bia/Menta/Huber/D'Ambrosio:
Harnessing Genetic Variants for Local Average Treatment Effect Estimation
DP 18598 - Comey/Eng/Leung/Pei:
Supercompliers
DP 18605 - Bell:
A Clarification Regarding NBER Working Paper 33643
DP 18606 - Jenkins/Rios-Avila:
Fitting the Bivariate Mixed Poisson Regression Model by Maximum Simulated Likelihood
DP 18608 - Stark/Kosiorowski:
An Exploratory Foray into the Inclination to Cooperate in Spite of Cooperation-Induced Stress
Please find the abstracts and download links below.
IZA DP No. 18501
Yves Zenou:
Peer vs. Network Effects: Microfoundations, Identification, and Beyond
Abstract:
This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first analyze the microfoundations of peer effects through linear–quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Then, we examine the main identification challenges in linear-in-means models—reflection, correlated effects, and sorting—and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers’ shocks, random assignment, and exogenous variation in network links. Finally, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdepend ent layers.
https://docs.iza.org/dp18501.pdf
IZA DP No. 18511
Ioan-Sebastian Buhai:
The Geometry of Heterogeneous Extremes: Optimal Transport and Entropic Design
Abstract:
Extreme economic outcomes are not shaped by tails alone. They are also shaped by unequal access to opportunities. This paper develops a theory of heterogeneous extremes by taking the distribution of opportunity access as the object of study. In a mixed Poisson search setting, normalized maxima admit a Laplace mixture representation that yields order comparisons and a clean benchmark against the homogeneous economy. The main contribution is geometric: a canonical coupling turns differences in heterogeneity into optimal transport bounds for the whole induced law of extremes, the full schedule of top quantiles, and structured counterfactual paths between economies. The paper also derives a second order expansion that separates classical extreme value approximation error from heterogeneity effects. As a complementary normative exercise, it studies an entropy regularized design problem for reallocating opportunities under a mean constraint. A stylized labor market network applicat ion interprets heterogeneity as unequal access to job opportunities and shows how the framework can be used for tail counterfactuals and robustness analysis of top wage distributions.
https://docs.iza.org/dp18511.pdf
IZA DP No. 18560
Reiko Gotoh, Ryo Kambayashi:
Empirical Challenges in the Capability Approach: Measuring Capability Sets and Unfreedom through Counterfactual Comparisons
Abstract:
This study addresses a fundamental challenge in the empirical application of the Capability Approach: the measurement of the “capability set” as an opportunity set. Unlike standard utility-based measures, measuring capability requires assessing the welfare of potential activities—including those not chosen. We propose a novel methodology that bridges normative social choice theory and econometric causal inference. Specifically, we interpret the Average Treatment Effect derived from panel data fixed-effects models as capturing counterfactual welfare differences between alternative actions. Using a unique panel dataset of elderly individuals in Japan, focusing on “going-out” versus “staying-home” behavior, we evaluate the size of capability sets and the degree of “unfreedom” as the welfare gap between actions. Furthermore, we propose and apply several aggregation rules, ranging from Utilitarian to Rawlsian, to construct group-level capability measures. Our empirical results dem onstrate that the ranking of social groups varies significantly depending on the normative aggregation rule employed, highlighting the importance of explicitly defining the informational basis of social evaluation.
https://docs.iza.org/dp18560.pdf
IZA DP No. 18573
Anna Krumme, Matthias Westphal:
Testing IV Validity and LATE Interpretation Using Flexible Covariate Specifications
Abstract:
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.
https://docs.iza.org/dp18573.pdf
IZA DP No. 18594
Santiago Acerenza, Otávio Bartalotti, Federico Veneri:
Testing Identifying Assumptions in Tobit Models
Abstract:
We develop testable implications for the identifying assumptions of Tobit and IV-Tobit models: linear index, (joint) normality of errors, treatment (instrument) exogeneity, and relevance. The new testable equalities can detect all possible observable violations of the identifying conditions. The proposed test procedure for the model's validity uses existing inference methods for intersection bounds. Simulations suggest adequate test size and power in detecting exogeneity and error structure violations. We review and propose alternatives to partially identify the parameters of interest under less restrictive assumptions. We revisit a study of married women's labor supply in Lee (1995) to demonstrate the test’s practical implementation. We qualitatively replicate their original findings, but our validity test rejects the IV-Tobit model. Estimating our proposed robust lower bound, we find that an additional \$1,000 in other household income cannot reduce female labor supply by m ore than 4.2 hours annually, but cannot rule out that the effect is zero.
https://docs.iza.org/dp18594.pdf
IZA DP No. 18595
Michela Gianna Bia, Giorgia Menta, Martin Huber, Conchita D'Ambrosio:
Harnessing Genetic Variants for Local Average Treatment Effect Estimation
Abstract:
When multiple instruments are available, conventional instrumental variable estimators aggregate across heterogeneous margins of compliance, often yielding effects without a clear economic interpretation. This issue worsens when some instruments violate the exclusion restriction, as in settings using genetic variants. We propose a clustering-based plurality framework for instrumental variable estimation that addresses both instrument heterogeneity and invalid instruments. Rather than imposing a single causal parameter, our method groups instruments by similarity in the first stage and applies a plurality rule on subgroups with similar reduced-form relationships to identify locally valid subsets. This produces a set of margin-specific local average treatment effects instead of a single pooled estimate. We extend plurality-based identification to settings with non-mutually exclusive instruments, such as Mendelian Randomization designs. We illustrate the method in a two-sample M endelian Randomization study of the effect of education on smoking. Results confirm a negative causal effect while revealing substantial heterogeneity across instrument-defined margins, masked by pooled IV approaches.
https://docs.iza.org/dp18595.pdf
IZA DP No. 18598
Matthew Comey, Amanda Ryan Eng, Pauline Leung, Zhuan Pei:
Supercompliers
Abstract:
In an instrumental variable framework, we define supercompliers as the subpopulation whose treatment take-up positively responds to eligibility and whose outcome positively responds to take-up. Supercompliers are the only subpopulation to benefit from treatment eligibility and, hence, are important for policy evaluation. We propose conditions for characterizing supercompliers, and show how estimation and inference can be conducted with instrumental variable regression. In two job training experiments, we demonstrate our machinery's utility, particularly in incorporating social welfare weights into marginal value of public funds analyses.
https://docs.iza.org/dp18598.pdf
IZA DP No. 18605
Alex Bell:
A Clarification Regarding NBER Working Paper 33643
Abstract:
This note clarifies the identifying assumptions underlying the approach in Bell (2020) and addresses a specific misinterpretation appearing in Mas (2025). That secondary source stated that the method requires independence between workers’ productivity and preferences over amenities. This characterization is not implied by the method, nor any previous iterations of it. Identification instead relies on a conditional independence assumption that pertains to a third observed variable, such as education, which the method casts as a shifter of individuals’ offer sets. The assumption stipulates that the shifter must be relevant to the quality of the offer set, but irrelevant to how workers split their compensation into pay versus amenities conditional on the quality of the offer set. Contrary to the Mas (2025) critique, the model in fact allows for arbitrary correlations between productivity and preferences. This note’s purpose is to clarify the record regarding these identifying as sumptions, which in turn shape how empirical evidence using this approach is evaluated in practice.
https://docs.iza.org/dp18605.pdf
IZA DP No. 18606
Stephen P. Jenkins, Fernando Rios-Avila:
Fitting the Bivariate Mixed Poisson Regression Model by Maximum Simulated Likelihood
Abstract:
We introduce bimpoisson, a program to fit the bivariate mixed Poisson regression model by maximum simulated likelihood (MSL) as per Munkin and Trivedi (The Econometrics Journal, 1999). Options include: sampling function or standard MSL; pseudo-random uniform or Halton draws, antithetic acceleration, and a first-order bias correction. We also provide post-estimation tools to predict conditional count probabilities and expected counts. We examine bimpoisson’s performance using Monte Carlo simulation analysis and provide two empirical illustrations using data from Xu and Hardin (The Stata Journal, 2016) and Munkin and Trivedi (1999). We provide practical advice about which MSL estimator and types of draws and number to use.
https://docs.iza.org/dp18606.pdf
IZA DP No. 18608
Oded Stark, Grzegorz Kosiorowski:
An Exploratory Foray into the Inclination to Cooperate in Spite of Cooperation-Induced Stress
Abstract:
We establish a new approach to the modeling of cooperation, and we formulate a new solution concept for cooperative games. We do this by constructing a game of cooperation between individuals who exhibit distaste for relative deprivation, RD, in the sense that they experience stress when their income is lower than that of their comparators. In such a game, the sharing out of the jointly earned income between these individuals when they cooperate, as prescribed by standard solutions of cooperative games, might not be acceptable to the individuals. The stress from RD may have the upper hand. Measuring stress by RD, we thus model a setting in which two individuals who are concerned with being relatively deprived need to decide whether or not to cooperate. We term this setting an RD cooperative game, and we design a rule, the RD solution, for the distribution of the income yielded in this game. The RD solution prescribes cooperation in spite of cooperation-induced stress and pres erves the spirit of standardness (an equal sharing of the gain that accrues from cooperation) for two-player games (a property shared by the main solution concepts for cooperative games).
https://docs.iza.org/dp18608.pdf
These new IZA Discussion Papers are now available online.
DP 18501 - Zenou:
Peer vs. Network Effects: Microfoundations, Identification, and Beyond
DP 18511 - Buhai:
The Geometry of Heterogeneous Extremes: Optimal Transport and Entropic Design
DP 18560 - Gotoh/Kambayashi:
Empirical Challenges in the Capability Approach: Measuring Capability Sets and Unfreedom through Counterfactual Comparisons
DP 18573 - Krumme/Westphal:
Testing IV Validity and LATE Interpretation Using Flexible Covariate Specifications
DP 18594 - Acerenza/Bartalotti/Veneri:
Testing Identifying Assumptions in Tobit Models
DP 18595 - Bia/Menta/Huber/D'Ambrosio:
Harnessing Genetic Variants for Local Average Treatment Effect Estimation
DP 18598 - Comey/Eng/Leung/Pei:
Supercompliers
DP 18605 - Bell:
A Clarification Regarding NBER Working Paper 33643
DP 18606 - Jenkins/Rios-Avila:
Fitting the Bivariate Mixed Poisson Regression Model by Maximum Simulated Likelihood
DP 18608 - Stark/Kosiorowski:
An Exploratory Foray into the Inclination to Cooperate in Spite of Cooperation-Induced Stress
Please find the abstracts and download links below.
IZA DP No. 18501
Yves Zenou:
Peer vs. Network Effects: Microfoundations, Identification, and Beyond
Abstract:
This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first analyze the microfoundations of peer effects through linear–quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Then, we examine the main identification challenges in linear-in-means models—reflection, correlated effects, and sorting—and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers’ shocks, random assignment, and exogenous variation in network links. Finally, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdepend ent layers.
https://docs.iza.org/dp18501.pdf
IZA DP No. 18511
Ioan-Sebastian Buhai:
The Geometry of Heterogeneous Extremes: Optimal Transport and Entropic Design
Abstract:
Extreme economic outcomes are not shaped by tails alone. They are also shaped by unequal access to opportunities. This paper develops a theory of heterogeneous extremes by taking the distribution of opportunity access as the object of study. In a mixed Poisson search setting, normalized maxima admit a Laplace mixture representation that yields order comparisons and a clean benchmark against the homogeneous economy. The main contribution is geometric: a canonical coupling turns differences in heterogeneity into optimal transport bounds for the whole induced law of extremes, the full schedule of top quantiles, and structured counterfactual paths between economies. The paper also derives a second order expansion that separates classical extreme value approximation error from heterogeneity effects. As a complementary normative exercise, it studies an entropy regularized design problem for reallocating opportunities under a mean constraint. A stylized labor market network applicat ion interprets heterogeneity as unequal access to job opportunities and shows how the framework can be used for tail counterfactuals and robustness analysis of top wage distributions.
https://docs.iza.org/dp18511.pdf
IZA DP No. 18560
Reiko Gotoh, Ryo Kambayashi:
Empirical Challenges in the Capability Approach: Measuring Capability Sets and Unfreedom through Counterfactual Comparisons
Abstract:
This study addresses a fundamental challenge in the empirical application of the Capability Approach: the measurement of the “capability set” as an opportunity set. Unlike standard utility-based measures, measuring capability requires assessing the welfare of potential activities—including those not chosen. We propose a novel methodology that bridges normative social choice theory and econometric causal inference. Specifically, we interpret the Average Treatment Effect derived from panel data fixed-effects models as capturing counterfactual welfare differences between alternative actions. Using a unique panel dataset of elderly individuals in Japan, focusing on “going-out” versus “staying-home” behavior, we evaluate the size of capability sets and the degree of “unfreedom” as the welfare gap between actions. Furthermore, we propose and apply several aggregation rules, ranging from Utilitarian to Rawlsian, to construct group-level capability measures. Our empirical results dem onstrate that the ranking of social groups varies significantly depending on the normative aggregation rule employed, highlighting the importance of explicitly defining the informational basis of social evaluation.
https://docs.iza.org/dp18560.pdf
IZA DP No. 18573
Anna Krumme, Matthias Westphal:
Testing IV Validity and LATE Interpretation Using Flexible Covariate Specifications
Abstract:
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.
https://docs.iza.org/dp18573.pdf
IZA DP No. 18594
Santiago Acerenza, Otávio Bartalotti, Federico Veneri:
Testing Identifying Assumptions in Tobit Models
Abstract:
We develop testable implications for the identifying assumptions of Tobit and IV-Tobit models: linear index, (joint) normality of errors, treatment (instrument) exogeneity, and relevance. The new testable equalities can detect all possible observable violations of the identifying conditions. The proposed test procedure for the model's validity uses existing inference methods for intersection bounds. Simulations suggest adequate test size and power in detecting exogeneity and error structure violations. We review and propose alternatives to partially identify the parameters of interest under less restrictive assumptions. We revisit a study of married women's labor supply in Lee (1995) to demonstrate the test’s practical implementation. We qualitatively replicate their original findings, but our validity test rejects the IV-Tobit model. Estimating our proposed robust lower bound, we find that an additional \$1,000 in other household income cannot reduce female labor supply by m ore than 4.2 hours annually, but cannot rule out that the effect is zero.
https://docs.iza.org/dp18594.pdf
IZA DP No. 18595
Michela Gianna Bia, Giorgia Menta, Martin Huber, Conchita D'Ambrosio:
Harnessing Genetic Variants for Local Average Treatment Effect Estimation
Abstract:
When multiple instruments are available, conventional instrumental variable estimators aggregate across heterogeneous margins of compliance, often yielding effects without a clear economic interpretation. This issue worsens when some instruments violate the exclusion restriction, as in settings using genetic variants. We propose a clustering-based plurality framework for instrumental variable estimation that addresses both instrument heterogeneity and invalid instruments. Rather than imposing a single causal parameter, our method groups instruments by similarity in the first stage and applies a plurality rule on subgroups with similar reduced-form relationships to identify locally valid subsets. This produces a set of margin-specific local average treatment effects instead of a single pooled estimate. We extend plurality-based identification to settings with non-mutually exclusive instruments, such as Mendelian Randomization designs. We illustrate the method in a two-sample M endelian Randomization study of the effect of education on smoking. Results confirm a negative causal effect while revealing substantial heterogeneity across instrument-defined margins, masked by pooled IV approaches.
https://docs.iza.org/dp18595.pdf
IZA DP No. 18598
Matthew Comey, Amanda Ryan Eng, Pauline Leung, Zhuan Pei:
Supercompliers
Abstract:
In an instrumental variable framework, we define supercompliers as the subpopulation whose treatment take-up positively responds to eligibility and whose outcome positively responds to take-up. Supercompliers are the only subpopulation to benefit from treatment eligibility and, hence, are important for policy evaluation. We propose conditions for characterizing supercompliers, and show how estimation and inference can be conducted with instrumental variable regression. In two job training experiments, we demonstrate our machinery's utility, particularly in incorporating social welfare weights into marginal value of public funds analyses.
https://docs.iza.org/dp18598.pdf
IZA DP No. 18605
Alex Bell:
A Clarification Regarding NBER Working Paper 33643
Abstract:
This note clarifies the identifying assumptions underlying the approach in Bell (2020) and addresses a specific misinterpretation appearing in Mas (2025). That secondary source stated that the method requires independence between workers’ productivity and preferences over amenities. This characterization is not implied by the method, nor any previous iterations of it. Identification instead relies on a conditional independence assumption that pertains to a third observed variable, such as education, which the method casts as a shifter of individuals’ offer sets. The assumption stipulates that the shifter must be relevant to the quality of the offer set, but irrelevant to how workers split their compensation into pay versus amenities conditional on the quality of the offer set. Contrary to the Mas (2025) critique, the model in fact allows for arbitrary correlations between productivity and preferences. This note’s purpose is to clarify the record regarding these identifying as sumptions, which in turn shape how empirical evidence using this approach is evaluated in practice.
https://docs.iza.org/dp18605.pdf
IZA DP No. 18606
Stephen P. Jenkins, Fernando Rios-Avila:
Fitting the Bivariate Mixed Poisson Regression Model by Maximum Simulated Likelihood
Abstract:
We introduce bimpoisson, a program to fit the bivariate mixed Poisson regression model by maximum simulated likelihood (MSL) as per Munkin and Trivedi (The Econometrics Journal, 1999). Options include: sampling function or standard MSL; pseudo-random uniform or Halton draws, antithetic acceleration, and a first-order bias correction. We also provide post-estimation tools to predict conditional count probabilities and expected counts. We examine bimpoisson’s performance using Monte Carlo simulation analysis and provide two empirical illustrations using data from Xu and Hardin (The Stata Journal, 2016) and Munkin and Trivedi (1999). We provide practical advice about which MSL estimator and types of draws and number to use.
https://docs.iza.org/dp18606.pdf
IZA DP No. 18608
Oded Stark, Grzegorz Kosiorowski:
An Exploratory Foray into the Inclination to Cooperate in Spite of Cooperation-Induced Stress
Abstract:
We establish a new approach to the modeling of cooperation, and we formulate a new solution concept for cooperative games. We do this by constructing a game of cooperation between individuals who exhibit distaste for relative deprivation, RD, in the sense that they experience stress when their income is lower than that of their comparators. In such a game, the sharing out of the jointly earned income between these individuals when they cooperate, as prescribed by standard solutions of cooperative games, might not be acceptable to the individuals. The stress from RD may have the upper hand. Measuring stress by RD, we thus model a setting in which two individuals who are concerned with being relatively deprived need to decide whether or not to cooperate. We term this setting an RD cooperative game, and we design a rule, the RD solution, for the distribution of the income yielded in this game. The RD solution prescribes cooperation in spite of cooperation-induced stress and pres erves the spirit of standardness (an equal sharing of the gain that accrues from cooperation) for two-player games (a property shared by the main solution concepts for cooperative games).
https://docs.iza.org/dp18608.pdf
IZA DP Alerts | www.iza.org
If you have trouble downloading the papers, or for any other questions regarding the IZA Discussion Paper Series, please contact iza...@liser.lu.
IZA@LISER Network
Luxembourg Institute of Socio-Economic Research (LISER)
11, Porte des Sciences, L-4366 Esch-sur-Alzette / Belval
Privacy Policy | Manage your subscriptions
If you have trouble downloading the papers, or for any other questions regarding the IZA Discussion Paper Series, please contact iza...@liser.lu.
IZA@LISER Network
Luxembourg Institute of Socio-Economic Research (LISER)
11, Porte des Sciences, L-4366 Esch-sur-Alzette / Belval
Privacy Policy | Manage your subscriptions
IZA DP Alerts
May 22, 2026, 9:11:09 AMMay 22
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