Questions tagged [instrumental-variable]
The instrumental-variable tag has no usage guidance.
54
questions
1
vote
1
answer
23
views
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 ...
- 13
1
vote
1
answer
42
views
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 ...
- 11
1
vote
1
answer
32
views
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 ...
- 25
0
votes
0
answers
21
views
Imputed Mexican share instrument
I am trying the construct the imputed Mexican share instrument from the paper "Task Specialization, Immigration and Wages by Peri and Sparber" and hoping if anyone could confirm whether I am ...
- 135
3
votes
0
answers
33
views
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 $Y$, ...
- 1,241
1
vote
1
answer
51
views
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,...
- 25
1
vote
0
answers
30
views
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 ...
6
votes
0
answers
58
views
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:
$$x_{1i} =\...
- 2,807
0
votes
0
answers
37
views
Instrumental Variables - Exogeneity Tests using region characteristics
I am using IV methods to establish the causality, I want to run some exogeniety tests. I have been going over Woolridge (Econometric Analysis of Cross Section and Panel Data, 2010) and I am not ...
- 21
1
vote
1
answer
23
views
Estimating parameters when introducing IV Instrument
Say, you have a model
$$
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} = \...
- 197
1
vote
0
answers
29
views
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 ...
- 113
3
votes
1
answer
75
views
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 ...
- 33
5
votes
1
answer
58
views
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 ...
- 2,807
3
votes
0
answers
252
views
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 ...
- 2,807
2
votes
0
answers
133
views
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 ...
- 721
1
vote
1
answer
119
views
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 ...
- 11
0
votes
0
answers
30
views
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 ...
- 29
1
vote
1
answer
51
views
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 ...
- 155
0
votes
2
answers
78
views
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 ...
- 1
2
votes
1
answer
83
views
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 ...
- 341
3
votes
1
answer
110
views
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?
- 31
3
votes
0
answers
27
views
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 ...
0
votes
1
answer
34
views
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 \...
- 159
1
vote
1
answer
61
views
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,...
- 111
2
votes
0
answers
16
views
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 ...
- 121
2
votes
2
answers
226
views
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 ...
- 23
1
vote
0
answers
117
views
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 ...
4
votes
1
answer
115
views
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} ...
- 143
4
votes
2
answers
136
views
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 ...
- 141
4
votes
1
answer
6k
views
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,...
1
vote
0
answers
38
views
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, ...
- 111
3
votes
2
answers
178
views
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 ...
0
votes
1
answer
33
views
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 ...
1
vote
1
answer
85
views
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 ...
- 11
0
votes
0
answers
53
views
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
votes
1
answer
61
views
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 ...
- 193
2
votes
1
answer
58
views
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.
...
- 352
5
votes
1
answer
2k
views
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 ...
- 151
6
votes
2
answers
299
views
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 ...
- 61
1
vote
0
answers
38
views
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 ...
- 11
0
votes
1
answer
103
views
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 ...
2
votes
2
answers
532
views
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\...
- 668
5
votes
1
answer
2k
views
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,
$...
- 53
4
votes
1
answer
103
views
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.
...
- 41
1
vote
0
answers
456
views
How to test if variables are jointly determined?
If I wanted to test, for example, if consumption growth and credit growth are jointly determined, and therefore justifying the use of instrumental variables, how would I go about this? Would running a ...
- 11
9
votes
3
answers
24k
views
What is the difference between two stage least squares and instrumental variable regression?
I'm doing independent study and I am having trouble understanding the difference between these two estimators.
I get that 2SLS is predicting the endogenous variable, and that instrumental variables ...
0
votes
1
answer
421
views
IV：Quasi-random variance V.S. 'Placebo' check
I read some papers about transportation infrastructure. I am confuse with the following two case.
Some routes are unlikely to have been randomly assigned across cities over time. Thus, In some papers(...
- 273
1
vote
0
answers
76
views
Trouble Deriving Indentification Scheme in Gertler-Karadi (2015) AEJ
I'm having trouble following a derivation that Gertler-Karadi (2015) AEJ http://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.20130329 do in their paper on Footnote 4 on the bottom of page 52. I've tried ...
- 21
7
votes
2
answers
156
views
Using another person's guess as an IV
In Estimates of the Economic Return to Schooling from a New Sample of Twins by Orley Ashenfelter and Alan Krueger, they correct sampling error with an IV. They claim that their results imply a larger ...
user4207
3
votes
2
answers
929
views
How to justify an instrumental variable?
I am hoping for some tips on what I could do for a term paper in applied econometrics. We are running a 2sls where I want to use a firm's location as an IV. How can I go about justifying it is a valid ...
