Questions tagged [instrumental-variable]
The instrumental-variable tag has no usage guidance.
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Abadie's Kappa (2003) for continuous treatments / IVs
Does somebody know if there exist results and estimators to deal with controls in IV estimation under heterogeneous treatment effects, analogous to Abadie's Kappa (2003) for the binary case?
Abadie, ...
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11
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Including Controls for Relevance Test in First Stage Regression of IV?
I am conducting an instrumental variable approach (IV) in my paper, and I am puzzled how to correctly test for the relevance / strength of the instrument assumption.
I recently read in a paper by ...
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Errors in variable, statistics/econometrics, measurement error
I didn't understand the deduction involving Plim. Why do the Plim of the terms on the left translate as variance in the first two cases?
here is the continuation of the print. were i have the question
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What does it mean to "replace all variables with the residuals after projections on any additional exogenous regressors"
I am conducting IV Regression and to make sure that my instrument is not weak, I want to use Montiel Olea & Pflueger (2013) robustness test. (see: Paper by Montiel Olea & Plueger (2013) ).
To ...
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IV Regression with More Observations for First Stage than Second Stage
This is a very basic question, but I need help. Imagine I have a dataset for variables y, x, and z. I am running an instrumental variable regression such that y is my main outcome variable. So I am ...
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Examples of instrumental variables for business problems (not rainfall!)
I have been learning about IV as a non-economist and I think I understand the examples I've seen which used rainfall as an IV for modeling the sales of crops or fish at an outdoor market.
However, for ...
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99
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Instrumental Variable: Bias & larger standard errors
Let's assume the instrument $Z$ satisfies instrumental exogeneity $corr(Z, \epsilon)=0$
and it's relevant $corr(Z, X_{end})≠0$. Where $\epsilon$ is error term and $X_{end}$ is the endogenous ...
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Using an enrollment probability as an instrument
Can someone walk me through whether this makes sense?
Individuals can apply to be enrolled in a treatment (a particular program), or not.
The probability of actual enrollment for applicants varies ...
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2
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84
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Is my instrument too noisy?
I have an instrument, that I want to use with IV 2SLS, to predict my endogenous variable.
The scatter plot of my instrument against my endogenous variable looks like this.
Using Stata's binscatter, I ...
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IV - Is this correct?
I have the following question.
Currently I have an econometric model that uses an instrumental variable, particularly a Bartik instrument (which some people call shift-share). I'm proceding as Mayda ...
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120
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How to visualize first-stage in IV regression?
I know what matters is the F-Statistic, but for a presentation it would also be nice to add a plot that visually shows the first stage. How to best visualize that?
Say you have an outcome $Y$, ...
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Can I instrument an endogenous variable and its quadratic form with the instrument and its quadratic form?
I have the following problem, where I would like to have an advise or a reference:
I'm estimating a model which usually (in other papers) only includes the explanatory variable in its linear form, but,...
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Adding industry dummies to 2SLS in R
for my Master Thesis I want to regress the ESG score on the stock price drop during the pandemic. For OLS this works fine. To check for potential Endogeneity I also conduct a 2SLS regression with the ...
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131
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Is 2SLS asymptotically MLE?
$$y_i =\beta_0 +\beta_1 x_{1i}+\beta_2 x_{2i}+\varepsilon_i$$
Suppose $x_1$ is endogenous but $x_2$ is exogenous. We have two excluded instruments, $z_1$ and $z_2$. The first stage is:
$$x_{1i} =\...
- 3,458
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Instrumental Variables - Exogeneity Tests using region characteristics
I am using IV methods to establish the causality, I want to run some exogeniety tests. I have been going over Woolridge (Econometric Analysis of Cross Section and Panel Data, 2010) and I am not ...
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Estimating parameters when introducing IV Instrument
Say, you have a model
$$
y_{it} = \beta_1 a_{it} + \beta_2 b_{it}
$$
And you find that $a_{it}$ is endogenous, therefore, you need to find an instrument for it.
Say you find an instrument $z_{it} = \...
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Fuzzy RDD when individuals can affect the probability of treatment
I want to evaluate the effect of getting into a program on earnings. In my case individuals that get a score above $c$ can decide weather to get into the program or not. On the other hand those that ...
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139
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IV regression: first stage in logs, second stage in levels?
I have a regression in levels, derived from theory.
I want to instrument one of the variables, but the best instrument I find has a weak correlation to the endogenous variable in levels, and a strong ...
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C-statistic when one estimation is just identified
My question is motivated by Do, Joshi, and Stopler's paper "Can Environmental Policy Reduce Infant Mortality? Evidence from the Ganga Pollution Cases".
A simplified form of their models that ...
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757
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Kleibergen Paap F-statistic
I have commonly seen references to a Kleibergen and Paap F-statistic. In their paper, I see a derivation of a chi-squared statistic, but don't see any references to the F-distribution or F-stat. In ...
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280
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Difference between AR confidence intervals reported in weakiv versus twostepweakiv
Should the Anderson-Rubin confidence intervals reported in weakiv and twostepweakiv be equal to each other? Sun (2018) does not ...
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136
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IV estimate for entire sample is larger than IV estimates for subsets of sample?
I am using two-stage least squares to estimate a local average treatment effect, with 'treatment' being the endogenous variable and 'assignment to treatment' being the instrument. If I use my full ...
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Advice on research methodology
I had wanted to ask this community for some advice on some potential methodologies I am developing.
Context: I want to evaluate the effectiveness of a component of this scholarship program, which ...
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Is exogeneity guaranteed for a lottery-generated instrumental variable?
If using $z$ as an instrument for $x$, to study the effect $x$ has on $y$ and given that $z$ was indeed generated through a lottery, is it definite that exogeneity of $z$ will hold?
I have looked at ...
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How should I regress income inequality on economic growth?
I would like to know which variables to use to regress income inequality on economic growth. For income inequality, I am thinking of using the Gini index, but don't know what measurement exactly.
For ...
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142
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Interacting covariates with the instrument in the first stage
If I want to run a 2 stage least squares (2SLS) regression with:
Relationship of interest: $Y = \alpha + \beta X + \varepsilon $, where $X$ is the endogenous explanatory variable of interest.
If I ...
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Why do we need at least as many instrumental variables as endogenous regressors to identify parameters in 2SLS?
As the title says. Why do we need at least as many instrumental variables as endogenous regressors to identify parameters?
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Instrumental variable regression: How many interpretations?
I was reading Amemiya "Non-linear regression models" (1983) in which he says that
This statement should not be construed as a criticism of Theil's
interpretation. I know of at least six ...
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36
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The instrument in "The Colonial Origins of Comparative Development"
I am hoping to understand when an instrument is appropriate. For the purposes of this question, I'm considering a simplied version of the model in AJR (2000):
$$\begin{aligned}\text{GDP} &\sim \...
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Using dependent variable's and exogenous variables' lags as instruments in 2SLS
Suppose we have the following structural equations:
$$y=\beta_0+\beta_1x+\beta_2z_z+\beta_3z_3+\epsilon,$$
where $x$ is the endogenous variable and $z_1,z_2$ are exogenous variables. In the literature,...
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How to calculate and interpret a marginal treatment effect (local instrumental variable)? (Intuition through simple example.)
I am working on the intuition behind local instrumental variables (LIV), also known as the marginal treatment effect (MTE). I have worked some time on this and would benefit from solving a simple. I ...
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497
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What does it mean if the controls in my IV model are correlated with my instrument?
I am seeking to understand what it means for my 2SLS IV model if my controls are correlated with my instrument (such that when I add additional controls to my model that are positively correlated with ...
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Stata's "ivregress 2sls" command - generating F-stats to test for weak instrument
I am transitioning to using the "ivregress 2sls" command in Stata for IV estimates. I've been trying to produce F-statistics to test for whether the instrument is weak. I believe that the ...
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Skepticism about the claims of instrument variable validity/exclusion through a statistical test—the Arellano-Bond Test
I am an applied researcher and occasionally come across papers that have panel data and that use dynamic models with both a fixed-effects term and lagged DV (or multiple autoregressive terms):
$y_{it} ...
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is endogeneity a problem in the first-stage regression in a two-stage least square regression?
We have this model:
$$D=\alpha_1+\gamma_1 Z + \epsilon_1$$
$$Y=\alpha_2+\gamma_2 D + \epsilon_2$$
Notations are as usual: Y is the outcome, D is the treatment, Z is the instrument
Two conditions for ...
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Why are my 2SLS estimates much larger than my OLS estimates?
When performing IV regression, it is often taken as a sign of unbiasedness if the IV estimates are similar to the OLS estimates of the same model. My question is: If the estimates are very different,...
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Weak Instrument - Stock and Yogo
I have the following structural equations where $G,Z$ are endogenous and $X,Y$ are exogenous
$$ G_d=B_0+B_1Z+B_2X+u_1\\
G_s=a_0 +a_1Z+a_2Y+u_2 \\
G_d=G_s
$$
Now, I would like to perform 2SLS, thus, ...
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Some confusions about instrumental variable (econometrics)
As the title says, I have some confusions about instrumental variable.
According to my lecture note (which is supposed to be reliable), instrumental variable has two big properties:
Validity: an ...
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Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?
I am trying to examine the determinants of economic growth, essentially regressing a number of variables upon economic growth. I face a problem that there is likely simultaneous causality between many ...
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165
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Testing for weak instrument
I have 3 endogenous variables in my model and I have identified 3 (or max 4) instruments. I wanted to know appropriate test for identifying whether the instruments are weak or not given that I have ...
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instrumental variables
I have a question related to IV methods. Suppose I have a regression
$Y = a + b_1 X_1 + b_2 X_2 + \epsilon$,
where $Y$ is a dependent variable and $X_1$ is an endogenous independent variable and $...
3
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Imbens and Angrist (1994): the $D_i(z)$ variables
I'm referring to the Econometrica (1994) paper by Imbens and Angrist. In particular, I don't really understand the random variables $D_i(z)$ (defined on page 468). Could you please provide me with ...
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Validity condition for Instrumental Variables
My professor states the validity condition in the following way:
$W$ (the matrix of instrumental variables) must be such that
$ \text{plim} \, \frac{W'u}{N}=0$, where $u$ is the error term.
...
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Confounding versus endogenous variables. What is their relative hierarchical position?
There are valuable resources on the lexicon of types of variables quickly accessible, such as here. However, some of these concepts appear side-by-side often enough to make them confusing.
For ...
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Instrumental Variable Paper for Minimum Wage
I am trying to write a paper dealing with minimum wages and employment. I understand there is simultaneity bias between these two variables so I must come up with an instrument. Does anyone have any ...
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Using an instrument in IV that is not strictly exogenous to the variable it is instrumenting?
I am considering instrumenting HIV with ODA, to evaluate the impact of HIV on gold mining. There is a clear relationship between HIV and ODA, however it may easily be argued this is an endogenous ...
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Difference between $x$ and $X$
Sorry for my bad english, i'll try to explain my difficulty.
1° Question
In the last exam an exercise asked to derivate OLS estimators and calculate their value with the data provided (ex.: $\sum ...
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557
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Testing for Endogeneity
I apologize if this question is very basic. I have the following plain vanilla Instrumental Variable model.
$Y=\alpha+X\beta+\varepsilon$
$X=\delta+Z\gamma+\eta$
$\varepsilon\perp\eta,\quad Z\perp\...
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Can you use more than one instrumental variables in an Econometric model?
Can you use two instrumental variables $z_1$ and $z_2$ at the same time for $x_1$ and $x_2$, in the following regression model
$y=a+bx_1+cx_2+dX_{other}+e$, where
$y$ is the explained variable,
$...
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Testing if one regressor is a proxy for another
I'm reading Guiso, Sapienza and Zingales: "Trusting the Stock Market" The Journal of Finance, Vol. 63, No. 6, 2008 and have a question about how they test whether trust is a proxy for risk aversion.
...
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