# Control variables in instrumental variable regression

I have seen published papers include "exogenous controls" in their instrumental variables regression. Can someone explain:

1. What is meant by "exogenous" in this case?
2. The purpose of these "controls" when one is substantively interested in a consistent estimate of a single independent variable?

The only way I see this making sense is if you know the data generating process well enough to know that conditional on the control variable, the instrument satisfies the $Cov(Z,Y) = 0$ exclusion restriction. This seems incredibly unlikely in practice (at least in the social science).

• Why would that be less likely then finding an instrument that is not conditional on control variables? – Maarten Buis Jun 1 '16 at 13:54

1) Exogenous controls means that E(error|x) = 0. In the context of an IV regression it means that the exclusion restriction is satisfied or Cov(z,error) = 0. To quote Wooldridge, "In the context of omitted variables, instrument exogeneity means that z should have no partial effect on y (after x and omitted variables have been controlled for), and z should be uncorrelated with the omitted variables."