Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments / Joshua Angrist, Alan B. Krueger.

Format:

Book

Author/Creator:

Angrist, Joshua.

Contributor:

National Bureau of Economic Research.

Krueger, Alan B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8456.

NBER working paper series no. w8456

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Instrumental Variables and the Search for Identification

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

The method of instrumental variables was first used in the 1920s to estimate supply and demand elasticities, and later used to correct for measurement error in single-equation models. Recently, instrumental variables have been widely used to reduce bias from omitted variables in estimates of causal relationships such as the effect of schooling on earnings. Intuitively, instrumental variables methods use only a portion of the variability in key variables to estimate the relationships of interest; if the instruments are valid, that portion is unrelated to the omitted variables. We discuss the mechanics of instrumental variables, and the qualities that make for a good instrument, devoting particular attention to instruments that are derived from 'natural experiments.' A key feature of the natural experiments approach is the transparency and refutability of identifying assumptions. We also discuss the use of instrumental variables in randomized experiments.

Notes:

Print version record

September 2001.