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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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15 views

Does endogeneity problem matter when proving the existence of association/causality relationship?

In social science field (particularly Finance and Operations Management), we usually need to prove or disprove hypotheses of the type: X are positively associated with Y. One of the typical method to ...
5 views

interpretation of odds ratio in mendelian randomization analysis

I want to do a two-sample Mendelian Randomization (MR) study using summary data to estimate the effect of a continuous exposure on a binary outcome. The genetic associations with the exposure are ...
9 views

OLS and 2SLS normal equations

For a system of equations with $M=2$ endogenous variables, $Y=\begin{bmatrix} y_1 & y_2 \end{bmatrix}$ and $K=3$ exogenous variables, $X=\begin{bmatrix} x_1 & x_2 & x_3 \end{bmatrix}$. ...
26 views

How can I identify and choose instrumental variables?

I am interested in what effect civilian funding of rebel groups (X) has on their degree of violence (Y). There might be an endogeneity problem due to omitted variable bias and reserve causality. Hence,...
28 views

How to instrument categorical dummy variables

Suppose that X is a categorical variables for 4 possible regions. Suppose that we want to evaluate the effect of X on an outcome Y, but we believe X is correlated with unobservables. I separate ...
8 views

A nonmonoton Continuous Instrumental Variable (Can we use nonmonoton continuous instruments?)

I would like to ask " Can a continuous (nonbinary) instrumental variable can be nonmonotonic or not ?" Background of the problem : What do I mean? I want to give an example over an article. At an ...
15 views

IV - choosing among valid instruments

I am using an instrument variable approach where I have access to several valid (but many times weak instruments) to instrument for a singe endogenous variable. My question is how to think about which ...
20 views

Simultaneous equation model with endogenous regressors

Let's assume four dependent variables $Y_1$, $Y_2$ and $Y_3$ that are correlated. I want to evaluate the impact of several regressors: $X_1$, $X_2$ and $X_3$ on these 3 dependent variables using a ...
23 views

PCA of many weak IVs in 2SLS

"Instrumental variable estimators can be severely biased in finite samples when the degree of overidentification is high or when the instruments are weakly correlated with the endogenous regressors." ...
11 views

Strict exogeneity is violated: consequences

What are the consequences for the OLS estimator when weak exogeneity holds but strict exogeneity does not? Thank you.
11 views

Lagged variables as IVs

I want to run a endogeneity check on a particular explanatory variable. My dependent variables has value added of services in manufacturing exports, while my suspected endogenous variable is overall ...
6 views

Two-stage residual inclusion when having two endogenous variables

I am using residual inclusion to deal with the potential endogeneity of two regressors. The coefficient of these two variables vary widely in the structural equation depending on whether one or both ...
193 views

Can I ignore the negative R-squared value when I am using instrumental variable regression?

I am running an instrumental variable regression using 'ivreg' command in R program. I find that all my validity tests related to endogeneity are satisfied only except the R-squared value which is ...
23 views

Instrumental variable totally changed the endogenous variables's coefficient

I have a set of panel data and I am adding one instrumental variable to the panel regression. The coefficient for the endogenous variable is -3.8% (p<0.0001) with R^2=20% but after adding the IV ...
24 views

Repeated measures design (2x2 within subject variables) with one continuous variable and one covariate

I have a repeated measures design (one DV measured twice, both times in two different conditions) with one continuous IV and one (continuous) covariate. I'm trying to see if there is an interaction ...
89 views

Do I need Sargan test with equal numbers of instruments and endogenous variables when one instrument can affect more than one endogenous variables?

I have a instrumental variable logistic regression I run with three instruments (z1, z2, z3) and three endogenous variables (k1, k2, k3). Therefore, since the number of instruments "3" equals the ...
23 views

Equivalency of the control function approach and IV

I am trying to see how these two are equivalent. So say Y = BX1 + e1, and x1 is endogenous. and say I have a Z s.t. E[Z'e]=0, and say the linear project of x1 onto z is given by X1= piZ + N. Now, if ...
20 views

Instrumental variables analysis with exclusion restriction violation

I am working with data from a randomized experimental study in which the random assignment of units is used as an instrument. However, there are four endogenous variables (treatments) which are ...
31 views

Combining categories by Weight of Evidence

When calculating Information Value and Weight of Evidence, it's possible to draw a chart of WoE for each variable to study its effect on the state of the target variable. Now, I know it's possible to ...
21 views

What is “instrument contamination”?

When going through instrumental variable literature sometimes, but rather rarely, I happen to find expression "instrument contamination". What does it mean? Is this another expression for ...
18 views

Proving that average treatment effect for RDD with multiple cutoffs is a weighted average of the causal effect at each cutoff

Let $Xi$ denote the original running variable and $Ci$ be the cutoff that unit $i$ faces (e.g., the nearest cutoff). For simplicity, I consider a case where the binary treatment is assigned if $Xi$ ...
5 views

Strangely identical Probit and IVProbit results

I'm currently running 3 probit regressions, each of which have IV variants. In each model the regressors and instruments are identical (the coding essentially looks exactly the same for each model, ...
18 views

Hausman test statistic - to multiply or not to multiply by n

I am having some serious doubts regarding the formula of the Hausman statistic for the case in which I compare OLS and IV estimates. I am getting confused with what my references are giving me. What ...
9 views

Marginal Treatment Effect with a continuous treatment variable

I am totally new to the concept, but I would like to apply a MTE estimation within the following simultaneous equation model (if it is even possible) : \begin{cases} Y_i = \alpha_0 + \alpha_1. A_i + ...