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Questions tagged [instrumental-variable]

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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} =\...
Michael Gmeiner's user avatar
4 votes
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1k 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 ...
Michael Gmeiner's user avatar
3 votes
0 answers
157 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 $Y$, ...
Papayapap's user avatar
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3 votes
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28 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 ...
kenxavierfractal's user avatar
2 votes
0 answers
43 views

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 ...
Arthur's user avatar
  • 131
2 votes
0 answers
318 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 ...
erik's user avatar
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2 votes
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22 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 ...
Wissenschaft's user avatar
1 vote
0 answers
18 views

What's a classic (paper) example in which OLS gives unreasonable result, but IV estimate gives reasonable result?

I'm wondering are there are any classic papers, especially in the field of labor economics or development economics, that include regression tables showing OLS gives unreasonable result(like ...
ExcitedSnail's user avatar
1 vote
0 answers
159 views

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 ...
dewewdew's user avatar
  • 105
1 vote
0 answers
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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 ...
Hirschbraten22's user avatar
1 vote
0 answers
36 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 ...
Giorgetto's user avatar
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1 vote
0 answers
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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 ...
Colette Salemi's user avatar
1 vote
0 answers
41 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, ...
Anna's user avatar
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1 vote
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59 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 $...
Yuanchen Li's user avatar
1 vote
0 answers
39 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 ...
C. Hansen's user avatar
1 vote
0 answers
492 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 ...
user11687's user avatar
1 vote
0 answers
85 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 ...
jussplayin16's user avatar
1 vote
0 answers
131 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 ...
Heisenberg's user avatar
0 votes
0 answers
47 views

Can I use lagged independent variable as an instrument?

I am doing my Economics dissertation on the impact of competition law stringency (measured 0 to 1 on an index) on R&D levels as a % of GDP. I have an unbalanced panel data set of countries from ...
econstu123's user avatar
0 votes
0 answers
12 views

How to deal with plausibly exogenous instruments?

If you have some reasons to believe that an instrument is plausibly exogenous i.e. it is a weak instrument but it couldn't possibly be endogenous, what is a practical way to make inference?
Adi's user avatar
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IV combined with matching

I have seen a couple of papers combining DiD with matching. Is there also something similar for IV? Especially given the problems with linear inclusion of covariates in 2SLS, see Blandhol et al. (2022)...
Papayapap's user avatar
  • 1,843
0 votes
0 answers
37 views

What if the instrumental variable is endogenous in first stage

Suppose $y=\beta_0+\beta_1 x+u,E(xu)\not=0,E(u)=0$. $z$ satisfies $E(zu)=0$ (exogenous) and $Cov(x,u)\not=0$ (relevance). In first stage, we do $x=\pi_0+\pi_1z+v$ and get $\pi_1=\frac{S.Cov(x,v)}{Var(...
Xinyue Wu's user avatar
0 votes
0 answers
45 views

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
badanomics's user avatar
0 votes
0 answers
45 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 ...
Lorien's user avatar
  • 103
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0 answers
35 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 ...
Tara's user avatar
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