Questions tagged [instrumental-variable]
The instrumental-variable tag has no usage guidance.
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Correction of standard errors in IV model
In reference to paper titled "Estimation with Many Instrumental Variables" by Hansen, Hausman and Newey, I wanted to know how to find corrected standard errors in Stata for the many instruments case.
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1answer
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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 $...
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1answer
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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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1answer
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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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1answer
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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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2answers
116 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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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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1answer
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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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2answers
331 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\...
3
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1answer
634 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,
$...
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1answer
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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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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 ...
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3answers
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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 ...
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1answer
382 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(...
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0answers
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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 ...
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2answers
139 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 ...
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2answers
526 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 ...
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1answer
310 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 ...
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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 ...
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2answers
673 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 ...
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1answer
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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 $x_1$....
