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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 ...
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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 ...
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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, $X=\begin{bmatrix} x_1 & x_2 & x_3 \end{bmatrix}$. ...
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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,...
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1answer
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 ...
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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 ...
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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 ...
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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 ...
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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." ...
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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.
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 $Xi$ ...
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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, ...
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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 ...
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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 + ...
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22 views

Exogenous/control varible not include in IV when runing reg3

I have the following two-equation system. $$y_1=c_{10}+c_{11} y_2+c_{12} x_1+c_{12} x_3+e_1$$ $$y2=c_{20}+c_{21} y_{1}+c_{22} x_2+c_{23} x_3+e_2$$ where, $y_1$, $y_2$ are endogenous variables, $x_1$,$...
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188 views

Does direction of causality between instrument and variable matter?

The standard scheme of instrumental variable in terms of causality (->) is: Z -> X -> Y Where Z is an instrument, X ...
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61 views

The Durbin-Wu-Hausman test and its interpretation

I'm currently working out the interpretation of a Durbin-Wu-Hausman test. I have a linear regression which regresses the body mass index of an individual, "BMI", on different variables such as the ...
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Correction function to correct endogeneity without instrumental variable

What happens if the disturbances are divided into residuals? This could be a solution to correct endogeneity without instrumental variable?
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overidentification test

Dears, i have to run overidentification test using ivreg. the summary gave me this result: Diagnostic tests: df1 df2 statistic p-value Weak instruments 1 45 45.158 2.65e-08 **...
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14 views

Endogeneity Problems without instrumental variable

Before Philip G. Wright proposed the method of Instrumental Variables in 1928 as solution to endongenity problems, how did econometricians and statisticians solve economics models with endogeneity? ...
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40 views

Unbiasedness of Intrumental Variable Estimator

is instrumental variable estimator unbiased in the case of stochastic regressor X and how can i show this? (I know how to show consistency, i need to show unbiasedness)
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149 views

How to interpret the tests for weak instrument in R?

Stock & Yogo (2005) provide the rule-of-thumb that the first-stage F-test of an IV regression should be above 10 for the bias of the instrument to be less than 10%, and suggest to call weak an ...
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Why ivmodelFormula and ivmodel give different results in R?

I stumbled upon an issue with the ivmodel package: when exogenous covariates are included in the model, the ivmodel function ...
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16 views

Treatment effect on the non treated if there are no never-takers and no defiers

$Y$ is my outcome variable, $D$ is the treatment, $Z$ is the instrument, $Y_i$ is the outcome when $D=i$, $D_i$ is the treatment when $Z=i$ I don't understand the following result : when ...
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17 views

Direction of bias when changing from OLS to IV

If when using an instrumental variable it increases the size of the coefficient and changes the direction of the relationship compared to OLS --> what direction of bias does it suggest in the OLS ...
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65 views

Simulation in Stata: instrumental variables with endogenous nonlinear regressor

I'm doing an exercise from Microeconometrics Using Stata, by Cameron and Trivedi, Exercise 11 of Chapter 6 (page 204). "When an endogenous variable enters the regression nonlinearly, the obvious IV ...
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1answer
45 views

Intuition for Instrumental Variable estimator in Linear Regression Model

Suppose we have the linear regression model given by $y=X\beta+\epsilon$, but we have a violation of assumptions where $X$, the regressor matrix, and $\epsilon$ are correlated. Also, suppose there is ...
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15 views

How to find an instrumental variable

Let's consider the linear model with endogenous errors: $$ y_t = \beta x_t + e_t $$ with $E[x_t e_t] \neq 0$. How do we find in practice an instrumental variable (IV)? i.e. a variable $z_t$ that ...
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19 views

How to think of compliance (and IV and LATE) in phase-in RCT designs

How should we think of compliance in a phase-in RCT design? What are the assumptions recovering the LATE by instrumental variables in this case? Details: In a traditional (simultaneous) RCT, in case ...
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138 views

F-statistic in two-stage least-squares with many instruments

There is this rule of thumb that the first stage F-statistic should be >10 in instrumental variable analysis to rule out weak instruments. Is this "rule" for one instrument only or also valid if I ...
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1answer
33 views

Instrumental Variables with Missing Observations in the Endogneous Regressor

I have 10k observations for a dependent variable $Y$ and an endogenous regressor $X$ with many missing observations (90%). I also have an instrument $Z$ without missings. I know that the values for $X$...
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10 views

Dealing with endogeniety in an entire regression

I am using OLS to test the statistical significance of a state-wide(US states) sentiment variable that was calculated based on Twitter data. I use macro-variables(gdp, unemployment etc.) as controls. ...
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24 views

How do I use GAMs in instrumental variable analysis?

I have an outcome $Y$, a risk factor $X$, and an instrument $Z$. In a two-stage least squares (2SLS) setting, the first stage is $$ X=Z + \varepsilon $$ and the second stage uses predictions from ...
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22 views

Interpreting the relationship between my instrumented variable (X1), X2, and Y (IV regression)

I have run an IV regression with a dichotomous outcome (Y) and my endogenous ("instrumented") regressor (X1) is also dichotomous. I am assessing whether continuous variable (X2) is moderating the ...
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24 views

Comparing raw and log-transformed regression coefficients

I'm attempting to perform a power-calculation for a two-sample Mendelian randomization study using genome-wide association study (GWAS) summary statistics, with a binary outcome [http://cnsgenomics....
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3answers
480 views

Does the Heckman correction with an exclusion restriction provide causal inference?

I think I might be getting instrumental variables estimation and the Heckman correction with an exclusion restriction confused. I know that instrumental variables estimation is way to show causal ...
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1answer
186 views

Does the direction of correlation matter for Instrumental Variable?

For a valid instrumental variable: (1) the instrument must be correlated with the endogenous explanatory variables, and, (2) the instrument cannot be correlated with the error term in the ...
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14 views

Instrumental variables and GARCH

Can you use the predicted value from the first stage (as estimated using 2SLS) to replace the endogenous variable in a GARCH model? Or, what would be a different way of using instrumental variables in ...
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37 views

Bias/variance of IV estimation

I'm studying IV estimation by myself and have some confusion about the basics. Let $y=X\beta_0 + u$ be a linear model with endogenous variable $X$, and $Z$ be an instrument, meaning that $Z$ and $u$ ...
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45 views

Interpreting results of a placebo test

I am using an instrumental variables model to analyze the impact of internet use on hours worked. As part of my analysis, I conduct a placebo test using data from the pre-internet era. Unfortunately,...