# Questions tagged [instrumental-variables]

Instrumental variables (IV) are used for causal inference with observational data in the presence of endogeneity when standard regression methods yield biased and inconsistent estimates.

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### Relevance & Exogeneity of IV

I got two questions which are somehow closely related: Let's take the famous study of Acemoglu et al. (The Colonial Origins of Comparative Development: An Empirical Investigation) as an example. When ...
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### Test an instrument's correlation with unobservable when it's redundant in structural equation

I'm working on Wooldridge's “Econometric Analysis of Cross Section and Panel Data” and I don't fully get why this test would not work. I'll share my work with screenshots so it's clearer hope that's ...
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### F-statistic Two stage least squares (2SLS) regression

In Wooldridge's advanced book, on page 105, the F-statistic for 2SLS regression is introduced. Let me illustrate the computation step by step with the following concrete example: \begin{equation} \...
1 vote
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### Does reverse causality from Z to Y violate exclusion restriction in IV?

I am estimating the effect of endogenous X on Y using 2SLS estimator with an instrument variable (Z). X: Safety net program participation (binary), designed to increase household income Y: Household ...
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### Can I use the same regressors for Instrumental variables and the outcome variable?

I'm reading a research paper that uses an IV, they regress A, and B, to estimate C, then they use estimated C and actual B to regress on D an outcome variable. This seems to violate the only through ...
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### Instrument variable analysis using randomized data

I am analyzing the effect of two randomized interventions on 1) first-time and, 2) second-time event attendance. All variables are binary (0 vs. 1). Second attendance was conditional on first ...
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### Number of instruments in GMM (using pgmm in R)

Number of instruments used in GMM model (pgmm function in R) I performed a GMM (Generalized Methods of Moments) analysis in R using the ...
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### Problems with GMM (Generalized Methods of Moments) in R

I am interested in performing an analysis using a GMM model for a panel dataset. I am conducting the analysis in R, using the pgmm package. My code is the following:...
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### How to include random effect to ivreg model in R?

I have an endogenous variable X with instrumental variable Z and want to predict outcome variable Y. For this I have longitudinal data with user_id. Currently my model is: ...
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### Should instrumental variables abide by the effect hierarchy principle?

People sometimes include the interactions between their instruments and region/year or the interactions between different instruments in the first stage of a 2SLS regression. I wonder if the effect ...
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### Is this a case of simultaneous equations?

My model estimates the percentage of living-in agricultural workers (that is, the ones provided with board & accommodation) in labor force. The unit is the % of those workers in a district: Y = a0 ...
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### Can I have an interaction-term between the predicted endogenous variable and other exogenous variables in the second stage Modell of a 2SLS?

I have a question regarding 2SLS and interaction-terms between the predicted endogenous variable and a set of exogenous variables (second stage). I want to calculate the effect of an endogenous ...
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### 2-stage least squares (2SLS) with 0th-stage Probit correction: Additional fixed effects in 2SLS

I am dealing with a binary endogenous variable and thus trying to use a 2SLS model with Probit correction in the preliminary ("0th") stage, a procedure described in Wooldridge (2002; p.623, ...
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### Time series regression with instrument variable

I want to know what model I should use to make causal inferences with time series variables with the instrument variable method. For instance, I want to estimate the effect of price on sales. I have ...
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### What kind of tests should I run for my master's thesis?

I am analyzing the effect of covid rates and covid lockdown levels on murder and suicide rates for the 50 most populous counties in the U.S. I am not sure what to do to analyze the question in ...
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### Can an explanatory variable be both endogenous and exogenous?

I have two dependent variables that I will use in two separate models (namely math_score & language_score) and one independent variable (relative_power) that I will use in both models using Stata ...
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### Can an instrument be correlated with 2 endogeneous variables in instrumental variables regression?

Given that I have a dependent variable $Y_i$, two endogeneous variables $W_i \text{ and } X_i$ and an instrument correlated with both $W_i \text{ and } X_i$, can we still perform two stage least ...
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### instrument variable for bins of endogenous variable

In my research, for example, trunk is the endogenous independent variable of interest and headroom is the instrument variable for trunk. Both headroom and trunk is continuous variable. Let’s assume ...
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### Instrument fails when I cluster standard errors

I am replicating the Bhalotra-Figueras paper on women's political agency and health (Paper Here) an IV model where $x$ is measured at the district-level and have an instrument $z$ measured at the ...
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### Why add control variables in the second stage of an IV regression?

I am reading an article on the effect of income on energy choice (e.g., choice between traditional sources such as charcoal and modern ones such as electricity). The authors instrument income with ...
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### Why would an instrumental variable have its strength measured by an F-statistic?

A typical "rule of thumb" for instrumental variables is that an F-statistic of ten or higher indicates a strong instrument. This is mentioned in this Cross Validated post, which contains a ...
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### IV Regression - Instrumenting for Interaction Terms

So I have four variables: y, x1,x2 and z. I also have a vector of controls. x1 is a dummy variable, and I have reason to believe x2 is endogenous, so I want to run an IV regression. The problem is my ...
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### IV Regression - First Stage Observations Higher than Second Stage

This is a very basic question, but I need help. Imagine I have a dataset for variables y, x, and z. I am running an instrumental variable regression such that y is my main outcome variable. So I am ...
Imagine I want to estimate the following main regression: $$y = \beta_{1} x_{1} + \beta_{2} x_{2} + controls + \varepsilon$$ But I am worried about endogeneity of x1 and x2 and so I try to use the ...