Library Header Image
LSE Research Online LSE Library Services

Consistency without inference: instrumental variables in practical application

Young, Alwyn (2022) Consistency without inference: instrumental variables in practical application. European Economic Review, 147. ISSN 0014-2921

[img] Text (Young_consistency-without-inference--published) - Published Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (1MB)

Identification Number: 10.1016/j.euroecorev.2022.104112


I use Monte Carlo simulations, the jackknife and multiple forms of the bootstrap to study a comprehensive sample of 1309 instrumental variables regressions in 30 papers published in the journals of the American Economic Association. Monte Carlo simulations based upon published regressions show that non-iid error processes in highly leveraged regressions, both prominent features of published work, adversely affect the size and power of IV tests, while increasing the bias and mean squared error of IV relative to OLS. Weak instrument pre-tests based upon F-statistics are found to be largely uninformative of both size and bias. In published papers IV has little power as, despite producing substantively different estimates, it rarely rejects the OLS point estimate or the null that OLS is unbiased, while the statistical significance of excluded instruments is exaggerated.

Item Type: Article
Official URL:
Additional Information: © 2022 The Author
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 29 Apr 2022 13:54
Last Modified: 18 Jul 2022 18:03

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics