Questions tagged [instrumental-variable]
The instrumental-variable tag has no usage guidance.
46
questions
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0answers
22 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 ...
3
votes
1answer
49 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 ...
0
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0answers
11 views
Can current value of left hand side of a simultaneous equation be an instrument?
Inflation and output gap are endogenous variables in this regression. Can $r_t$ be an instrument? I know the lags can, but it is the first time I am seeing the current value of the left-hand side ...
5
votes
1answer
43 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 ...
3
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0answers
50 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
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0answers
32 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 ...
1
vote
1answer
109 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 ...
0
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0answers
26 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 ...
1
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1answer
49 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 ...
0
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2answers
72 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 ...
0
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0answers
16 views
Verification of logic behind instrumental variable approach
I would like to know whether the following reasoning regarding the instrumental variable approach is acceptable. I understand there are case-by-case factors that affect the applicability of ...
2
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1answer
53 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 ...
2
votes
1answer
62 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?
3
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0answers
26 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
1answer
24 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):
$$\begin{aligned}\text{GDP} &\sim \...
1
vote
1answer
19 views
Using dependent variable's and exogenous variables' lags as instruments in 2SLS
Suppose we have the following structural equations:
$$y=\beta_0+\beta_1x+\beta_2z_z+\beta_3z_3+\epsilon,$$
where $x$ is the endogenous variable and $z_1,z_2$ are exogenous variables. In the literature,...
1
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0answers
12 views
How to calculate and interpret a marginal treatment effect (local instrumental variable)? (Intuition through simple example.)
I am working on the intuition behind local instrumental variables (LIV), also known as the marginal treatment effect (MTE). I have worked some time on this and would benefit from solving a simple. I ...
2
votes
2answers
108 views
What does it mean if the controls in my IV model are correlated with my instrument?
I am seeking to understand what it means for my 2SLS IV model if my controls are correlated with my instrument (such that when I add additional controls to my model that are positively correlated with ...
1
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0answers
35 views
Stata's "ivregress 2sls" command - generating F-stats to test for weak instrument
I am transitioning to using the "ivregress 2sls" command in Stata for IV estimates. I've been trying to produce F-statistics to test for whether the instrument is weak. I believe that the ...
4
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1answer
99 views
Skepticism about the claims of instrument variable validity/exclusion through a statistical test—the Arellano-Bond Test
I am an applied researcher and occasionally come across papers that have panel data and that use dynamic models with both a fixed-effects term and lagged DV (or multiple autoregressive terms):
$y_{it} ...
4
votes
2answers
98 views
is endogeneity a problem in the first-stage regression in a two-stage least square regression?
We have this model:
$$D=\alpha_1+\gamma_1 Z + \epsilon_1$$
$$Y=\alpha_2+\gamma_2 D + \epsilon_2$$
Notations are as usual: Y is the outcome, D is the treatment, Z is the instrument
Two conditions for ...
4
votes
1answer
4k views
Why are my 2SLS estimates much larger than my OLS estimates?
When performing IV regression, it is often taken as a sign of unbiasedness if the IV estimates are similar to the OLS estimates of the same model. My question is: If the estimates are very different,...
1
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0answers
35 views
Weak Instrument - Stock and Yogo
I have the following structural equations where $G,Z$ are endogenous and $X,Y$ are exogenous
$$ 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, ...
3
votes
2answers
155 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
1answer
31 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
1answer
59 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 ...
0
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0answers
49 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
1answer
58 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 ...
2
votes
1answer
52 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.
...
5
votes
1answer
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 ...
6
votes
2answers
231 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 ...
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0answers
36 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 ...
0
votes
1answer
91 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
2answers
493 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\...
4
votes
1answer
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,
$...
4
votes
1answer
96 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.
...
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0answers
424 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 ...
9
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3answers
20k 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
1answer
414 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(...
1
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0answers
71 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 ...
6
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2answers
152 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 ...
3
votes
2answers
838 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 ...
1
vote
1answer
425 views
Which regression technique is used for calculating price elasticity in practice
Since we need to consider 'Endogeneity' between price and quantity while calculating price elasticity and since linear regression cannot handle the phenomenon of endogeneity if objective of the model ...
1
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0answers
127 views
Using an interaction term as the instrument (as in Barro QJE (2011))
I recently came across Barro and Redlick QJE (2011) paper, "Macroeconomic Effects from Government Purchases and Taxes", in which the authors instrument for defense spending with an interaction term ...
7
votes
2answers
1k views
Best instruments for "years of schooling"/"education"
As an answer to question “Seminal papers that later were proven to contain errors”, @snoram mentioned Angrist and Krueger (1991), and there use of quarter of birth as an (exogenous) instrument for ...
5
votes
1answer
171 views
IV - Is this procedure valid?
I have three variables: $y$, $x_1$ and $z$.
I'm interested in finding the effect of $x_1$ on $y$.
Unfortunately $x_1$ is endogenous so I use an instrument z.
I know that $z$ is correlated with $x_1$....
